I've been researching estate and gift taxes and I'm a little confused. Maybe some of my more learned members can help me out.
Is there any overlap/conflict between Estate Tax Exemptions and the life time Gift Tax Exemption?
For example let’s say that nothing in the current tax laws change. Therefore my understanding is that in 2011 the Estate Tax Exemption will be $1 mil. And, everyone has a lifetime gift exemption of $1 mil (over and above the annual $13k per person per year).
So, let say that next year, Old Codger (OC) has $2 mil in assets and he wants to leave it all to Pretty Young Thing (PYT) – and avoid taxes of course. But he doesn’t want to part with any of his money until he dies. He may need it.
Well, OC finds out, in January 2011, that he has 6 months to live. He knows he’s not going to need all his assets much longer. So he gifts PYT $1 mil. Since he’s never given away any of his assets before, the gift is under the lifetime gift exemption and is therefore not taxable for either party – right?
Then 6 months later OC kicks the bucket. His will leaves everything to PYT. His estate is now worth the remaining $1 mil and since it’s under the Estate Tax Exemption amount they both avoid taxes on that amount as well.
So, PYT ends up getting all OC’s $2 mil in assets without paying Uncle Sam any taxes.
Can this be right?
Is there any overlap/conflict between Estate Tax Exemptions and the life time Gift Tax Exemption?
For example let’s say that nothing in the current tax laws change. Therefore my understanding is that in 2011 the Estate Tax Exemption will be $1 mil. And, everyone has a lifetime gift exemption of $1 mil (over and above the annual $13k per person per year).
So, let say that next year, Old Codger (OC) has $2 mil in assets and he wants to leave it all to Pretty Young Thing (PYT) – and avoid taxes of course. But he doesn’t want to part with any of his money until he dies. He may need it.
Well, OC finds out, in January 2011, that he has 6 months to live. He knows he’s not going to need all his assets much longer. So he gifts PYT $1 mil. Since he’s never given away any of his assets before, the gift is under the lifetime gift exemption and is therefore not taxable for either party – right?
Then 6 months later OC kicks the bucket. His will leaves everything to PYT. His estate is now worth the remaining $1 mil and since it’s under the Estate Tax Exemption amount they both avoid taxes on that amount as well.
So, PYT ends up getting all OC’s $2 mil in assets without paying Uncle Sam any taxes.
Can this be right?