How to Decide About Gifting

Begin with a clear understanding. First, a gift is property irrevocably given or transferred without restrictions. The gift tax is a tax imposed on the transfer of gifted property during your lifetime, the value of which property exceeds the gift tax exemption.

The federal gift tax exemption for 2012 is $5,120,000. Thus, you may gift up to $5,120,000 of property during your lifetime without any gift tax due. However, that exemption amount is unified with the Federal estate tax exemption. Thus, if you gift $2,000,000 during your lifetime and you die in 2012, then you will have no gift tax due, but you will in essence have reduced your estate tax exemption to $3,120,000 (plus $13,000 per donee – to account for the annual exclusion from gift tax discussed below). In Maryland and the District of Columbia, as well as most other states, there is no state gift tax.

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