Series 66

Analyzing Your Client's Financial Profile - Estate and Gift Taxes

Unified Estate and Gift Tax
The total of all taxable gifts given during a person's lifetime plus taxable amounts transferred upon death are subject to a unified estate and gift tax. Estate taxes and gift taxes are interrelated, since the federal government applies the Unified Estate and Gift Tax Credit (also known as the Unified Credit) to both types of transfers of property.

Because this area of tax law is complex, clients with large estates should be advised to work with an estate planning specialist to create an estate plan that minimizes potential taxes.

While income taxes are paid by the person who receives the income, gift and estate taxes are paid by the person or entity that transfers the money. Gift taxes are paid by the donor, and estate taxes are paid by the estate. These taxes are progressive, meaning the tax rate increases with the size of the gift or estate.

Unified Estate and Gift Tax Credit
This amount has changed significantly over the years and is scheduled for additional changes in the future.


  • There is an unlimited Unified Credit for spouses. A spouse who passes away may leave an estate of any amount to the surviving spouse without subjecting the estate to taxes.
  • Currently estates valued at less than $5.25 million are free from taxes this amount increases to $5.34 million in 2014
  • See the following page for a table displaying current exclusion limits.
Gift tax exemption
According to the IRS Code, each person can gift up to $14,000 each year to an unlimited number of people. This is one way for wealthy people to reduce their estate prior to death. A married couple can gift $28,000 per year per beneficiary.


Exam Tips and Tricks
Consider these sample exam questions:


Which of the following gift given in one year from an aunt to her nieces would NOT be subject to gift tax?

  1. One $28,000 gift to one niece
  2. Two $14,000 gifts to two nieces
  3. Two $28,000 gifts to two nieces
  4. One $14,000 gift to one niece
  1. I only
  2. II & IV
  3. II & III
  4. I, II, III, & IV
The correct answer is "b" - since there is no information that the aunt is married, the transfers of $28,000 would be subject to gift tax


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