Exemptions and Exclusions from the GSTT
The GSTT Exemption
In 2010, the GSTT was waived and not applicable for property transfers. On Dec. 17, 2010, President Obama signed The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the "Act"). In addition to extending President Bush's income tax cuts, the Act addressed the Estate, Gift and Generation-Skipping Transfer (GSTT) tax laws for tax years 2013 and beyond. Each individual is now given a GSTT lifetime exemption amount of $5 million with an annual inflation adjustment. In 2013, the actual exemption amount is $5,250,000. Unlike the estate and gift tax, the GSTT exemption is not portable between spouses.
Qualifying Annual Exclusion Gifts and Direct Transfers
The annual GSTT exclusion amount is $14,000 (2013) per gift per person.
Example: Harold and Mary have three grandchildren and they would like to gift the maximum amount to each grandchild in 2013. What is the maximum gift before the GSTT will kick in?
Harold can gift $14,000 to each grandchild ($42,000 total), and
Mary can gift $14,000 to each grandchild ($42,000 total).
Annual exclusion gifts do not always qualify for the GSTT annual exclusion. Typically, only gifts given "directly" to grandchildren or to a trust for the benefit of a grandchild with a general power of appointment will qualify for the annual exclusion.
If a grandparent decides to pay the premium of a life insurance trust policy through the use of the annual gift (policy is for the benefit of the children and the grandchildren) the payment may not escape the GSTT. Since grandchildren (or more remote descendants) are potential beneficiaries, normally the GSTT exemption would be applied to the gift, but there is always a gray area if the gift is not given directly outright.
Sample Questions 1 - 4
TaxesThe lifetime maximum for gift taxes is $5.12 million. However, it could drop to $1 million. Here's what that will mean.
InsightsHere's a look at how much you should spend and what you should give this holiday season.
InsightsAn unbelievable amount of money gets wasted in the form of non-redemption: nearly $5 billion a year. These tips will ensure that your gift card gift doesn't go to waste.
Personal FinanceTalking Christmas gift budgets with family members can be hard, but having the talk will help you stay on track financially.
Personal FinanceGift cards can cost less when you buy them through a discount website. Just do the math before you cough up the cash.
Financial AdvisorA quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.
TaxesTaxes are often a deterrent from investing and saving. These financial practices will bring you no tax grief.
Financial AdvisorFinancial advisory clients may have more tax issues as their financial plans become more complicated. Here are a few of the major tax concerns clients face.
InsightsFinding a gift for a new boyfriend or girlfriend, your boss, or the postman can sometimes be a challenge.