• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Who We Are
    • About Our Firm
    • Attorney and Staff Profiles
    • Scott P. Schomer Certified As Specialist In Estate Planning, Trust And Probate Law
    • Trust and Probate Litigation: Verdicts and Settlements
  • Services
    • Asset Protection & Business Planning
    • Estate and Gift Tax Figures
    • Family-Owned Businesses
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Loss of a Loved One
    • Power of Attorney
    • Probate
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
    • Trust, Probate and Estate Litigation
    • Young Families
  • Probate
    • Is Probate Always Necessary In California?
    • Probate & Estate Planning Savings Calculator
    • Probate Administration
    • Probate Code 850 Petitions
    • Probate Disputes
    • Probate In California
    • Probate Laws
    • Probate Litigation
    • Why Hire A Probate Attorney
  • Elder Law
    • Conservatorship
    • Coping with Alzheimer’s
    • Estate Planning
  • Resources
    • Elder Law
      • Elder Law & Medi-Cal Definitions
      • Elder Law Reports
    • Estate Planning
      • Estate Planning Articles
      • Estate Planning Checkup
      • Estate Planning Definitions
      • Estate Planning Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Incapacity Planning Definitions
      • Is Your Estate Plan Outdated?
      • Special Needs Planning Can Protect Benefits
      • Top 10 Estate and Legacy Planning Techniques
    • Free Estate Planning Worksheet
    • Free Seminars
      • Webinars
    • Frequently Asked Questions
      • Advance Health Care Directives
      • Asset Protection
      • California Adult Conservatorship
      • Estate Planning
      • Estate Planning & Remarriage
      • Frequently Asked Questions For Families Without An Estate Plan
      • In-Home Elder Care
      • IRA Inheritance Planning
      • IRA & SECURE Act
      • Irrevocable Trust
      • Last Will and Testament
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Living Trust
      • Probate
      • Special Needs Planning
      • Trusts
      • Trust Administration
      • Wills
    • Newsletters
    • Pre Consultation Form
    • Presentations
    • Published Book
    • Trust Administration & Probate Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • Loss of a Loved One
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
  • Reviews
    • Our Reviews
    • Review Us
  • Communities We Serve
    • Los Angeles County
      • Bellflower
      • Cerritos
      • El Segundo
        • El Segundo Probate Resources
      • Hawthorne
      • Inglewood
      • Long Beach
        • Long Beach Elder Resources
        • Long Beach Probate Resources
      • Manhattan Beach
      • Playa del Rey
      • Santa Monica
      • Westchester
        • Westchester Elder Resources
        • Westchester Probate Resources
    • Orange County
      • Anaheim
      • Buena Park
      • Cypress
      • Fountain Valley
      • Garden Grove
      • Huntington Beach
        • Huntington Beach Elder Resources
        • Huntington Beach Probate Resources
      • Los Alamitos
        • Los Alamitos Probate Resources
      • Rossmoor
      • Stanton
      • Seal Beach
      • Westminster
  • Contact Us
  • BLOG
  • Videos

Schomer Law Group, Los Angeles Estate Planning and Elder Law and Elder Law Attorneys

Schomer Law Group, Los Angeles Estate Planning and Elder Law and Elder Law Attorneys

Connect With Us Today (310) 337-7696

Attend a Free Event
Home » Estate Planning » Gift Tax 101

Gift Tax 101

July 2, 2020Estate Planning

gift taxWe are going to provide an explanation of the gift tax in this post, but before you can understand the purpose of this tax, you have to digest some information about the federal estate tax.

This tax can significantly erode the wealth that you would like to pass along to your loved ones, because it carries a 40 percent top rate. Fortunately, most people don’t have to pay the tax because there is a credit or exclusion that you can use to transfer a certain amount tax-free.

During the current calendar year, the exact amount of this exclusion is $11.58 million. It is updated annually to account for inflation, so you will see a somewhat higher figure next year.

It should be noted that the estate tax is not applicable on transfers to your spouse if you are married to an American citizen.

Federal Gift Tax

When you hear about the existence of the estate tax, it would be logical to think about giving gifts while you are living to avoid the tax. This is a move that people used to make shortly after the estate tax was originally enacted in 1916. In 1924, a gift tax was put into place to close this window of opportunity.

There was resistance from some legislators, and it was repealed in 1926. Once again, wealthy people could give gifts while they were living, but the gift tax was reenacted in 1932. It has been in place continuously ever since then.

The $11.58 million exclusion that we have this year is a unified exclusion. It applies to large lifetime gifts along with the value of the estate that will be transferred to your heirs after you are gone.

Annual Gift Tax Exclusion

In addition to this unified lifetime exclusion, there are a few other exclusions that you can use to transfer assets in a tax-free manner. One of them is the annual per person gift tax exclusion.

You can use this exclusion to give as much $15,000 to any number of people each year free of taxation. This is another figure that is updated from time to time, so it may change at some point in the future.

If you are exposed to the federal estate tax, you could use this exclusion to transfer assets tax-free before you pass away. Granted, you would be limited. However, if you take the right steps for an extended period of time, you can make good use of this exclusion.

Since it is allotted to each individual taxpayer, so you and your spouse can each give $15,000 to an unlimited number of gift recipients annually.

To provide an example of how this exclusion can be used effectively, let’s say that you have four married children. You and your spouse could combine your exclusions to give $30,000 every year to each husband and each wife.

That would be $60,000 a couple, and when multiply that by four, you are looking at $240,000. In 10 years, $2.4 million of the family wealth would be transferred tax-free. In addition to direct gift giving, this exclusion is often used to fund certain types of tax efficiency trusts.

Educational Exemption

Under the tax code, you can pay school tuition for any number of students, and the gift tax would not be a factor. There is no limit to the overall amount that you can spend on tuition, but you have to pay the institution directly. This exemption does not extend to books, fees and living expenses, but you could use your annual $15,000 exclusion to provide additional support.

Medical Exemption

You are allowed to pay medical bills for others without being taxed for your generosity. This medical exclusion extends to the payment of health insurance premiums for other people.

Attend a Free Webinar!

We are offering webinars in lieu of our in-person seminars in light of the dangers that are presented by the novel coronavirus. You can learn a lot if you sit in on one of these sessions, and they are offered free of charge. To see the dates and obtain registration information, visit our webinar page.

  • Author
  • Recent Posts
Cesar Gil
Latest posts by Cesar Gil (see all)
  • What Happens If I Leave Property Out of My Living Trust? - December 21, 2021
  • Answer These Questions to Shape Your Estate Plan - December 8, 2021
  • What Are the Medi-Cal Rules for a Healthy Spouse? - December 6, 2021

Other Articles You May Find Useful

Los Angeles estate planning attorneys
What Is Missing in Your Estate Plan?
Los Angeles estate planning attorneys
What Is the Uniform Transfer to Minors Act?
Abogados de planificación patrimonial de Los Ángeles
Planificación Patrimonial para Parejas Sin Hijos
Now That Mid-Terms Are Over, Let’s Talk Taxes
Los Angeles estate planning attorneys
Estate Planning for Couples Without Children
Common Mistakes in Estate Planning – Part V

Primary Sidebar

Schomer Law Group, Los Angeles Estate Planning, Probate, and Elder Law Attorneys

Schomer Law Group

FREE Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

Testimonials

Client Review
July 29, 2020
    

We need to update our Living Trust and attended Schomer Law Group’s seminar. Afterwards we made an appointment and were impressed by the attention Scott Schomer and Liran Aliav gave to our case answering all questions and making suggestions how to minimize the estate tax. All the office staff is very friendly and we highly recommend Schomer Law Group.

Frank & Jutta R
Client Review
July 29, 2020
    

Mr. Schomer does an amazing job at explaining all the intricacies of establishing a trust. He and his team help you every step of the way so you always know what to expect and what you are preparing for. Best education you can get and the best gift you can give your family.

Paula M.
Client Review
July 29, 2020
    

We put off getting a trust for years. After attending a seminar with Scott Schomer we realized that the time had come to get a trust. We were given very good reasons for why we should get a trust. No pressure, just the plain facts. We are very relieved and happy to finally get our trust. Scott and Cesar were very knowledgeable, helpful and listened to our ideas of what we had to say. Any questions that we have now and in the future they are available to assist us to solve them. I recommend the Schomer Law Group and I wish we knew about them years ago.

Phillip G.
Client Review
July 29, 2020
    

When you’re presented with an invitation to attend in a mailer, you may have reservations, this was a truly gift!! My wife and I were educated and guided through the process of creating a family trust.
Both of our parents had attorney’s that “worked” with wills/trusts, but came up short. Fortunately, the Schomer Law Group was there! This is a group of attorney’s that only specialize in estate planning, law, and financial advice, so you know you’re getting expert and personalized advice. This is the best money we’ve ever spent!! Thank you!

Bob L.
Client Review
July 29, 2020
    

We knew we had to update our 10 year old ( 20 page ) trust. After several detailed meetings, Liran and Cesar produced a large ( 300 pages + ) highly detailed trust document that we have used to make sure our family estate is well managed and clearly understood.
They were all very helpful in answering myriad questions and explaining all the various options…

We would strongly recommend the Schomer Law Group to anyone with an estate of even modest means, to assure proper planning…

Bob S.
Client Review
July 29, 2020
    

We had contemplated updating our will and starting a trust for a number of years. After attending a talk by Scott Schomer we realized we were long overdue and the potential downside of not having our affairs in order was significant. Scott and his excellent team made the process simple and seamless. They were great listeners, addressed all our concerns and even pulled and processed all the paperwork from our financial institutions. If you are looking for assistance with estate planning, wills and trusts, we highly recommend Schomer Law Group.

Robert F.
Client Review
July 29, 2020
    

Very competent & informative – friendly atmosphere – ready to answer the most mundane questions – relaxed.

Joan S.
Client Review
July 29, 2020
    

Mr. Schomer was excellent in getting our family trust and estate affairs in order. My husband and I had put off doing this and Scott really made the process easy! He is very passionate in making sure his clients get all that they need and we really appreciated it. I would highly recommend him and look forward to the many years he will be available to assist our family.

Kim

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
  • Instagram
  • Pinterest

Subscribe To Our Blog

Sign up using the form below to get our latest estate planning updates!
  • This field is for validation purposes and should be left unchanged.

Office Address

El Segundo
2155 Campus Drive
Suite 250,
El Segundo, CA 90245
Phone: (310) 337-7696
Fax: 310-337-1277

See Larger Map Get Directions

Office Hours

Monday9:00 AM - 6:00 PM
Tuesday9:00 AM - 6:00 PM
Wednesday9:00 AM - 6:00 PM
Thursday9:00 AM - 6:00 PM
Friday9:00 AM - 6:00 PM

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Schomer Law Group

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
  • Instagram
  • Pinterest

footer-logo
© 2023 American Academy of Estate Planning Attorneys, Inc.

Schomer Law Group

Attorney Advertisement.

© 2023 American Academy of Estate Planning Attorneys, Inc.