WHAT IS THE ANNUAL GIFT TAX EXCLUSION

IN OKLAHOMA? “The annual gift tax exclusion allows you to give up to

$14,000 to any number of gift recipients within a calendar year free of the gift tax.”

Larry Parman OKLAHOMA ESTATE PLANNING & ELDER LAW ATTORNEY

What is the Annual Gift Tax Exclusionin Oklahoma? www.ParmanLaw.com 2

When you give someone a gift, you may not consider the tax implications. In

fact, gifts that you give in the United States are taxable. We have a federal gift tax

that carries a 40 percent maximum rate.

The reason why you do not receive a tax bill after you give people birthday gifts

is because there is an annual gift tax exclusion. At the present time, the amount

of this exclusion is $14,000 per year, per person.

This means that you can give as much as $14,000 to any number of gift

recipients within a calendar year free of the gift tax. To be clear, you can give any

amount tax-free, as long as you do not give more than $14,000 to any one

person within a calendar year.

It should be noted that this $14,000 figure is not permanently etched in stone.

There have been adjustments over the years to account for inflation, and the

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exact amount of the annual gift tax exclusion is always subject to change.

You do not have to use any of your $14,000 annual gift tax exclusion to give tax-

free gifts to your spouse. There is an unlimited marital deduction. This allows

you to give any amount of money to your spouse free of taxation.

ADDITIONAL GIFT TAX EXCLUSIONS

There are a couple of additional gift tax exclusions that we should highlight here.

One of them is the educational exclusion. You can pay tuition for students free of

the gift tax. There is no limit to the amount that you can pay, but it is a tuition-

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only exclusion. It does not include books, fees, living expenses, etc.

You could however choose to utilize your $14,000 per person annual gift tax

exclusion to provide extra resources for the student or students.

There is also amedical gift tax exclusion. You can pay medical bills for other

people without incurring any gift tax responsibility. It is also possible to use the

unlimited medical exclusion to pay for health care insurance that will benefit

others.

With both of these exclusions you must pay the bills directly. You cannot give the

money to the gift recipients tax-free under the assumption that they will use the

money to pay the bills.

LIFETIME UNIFIED GIFT AND ESTATE TAX EXCLUSION

In addition to these

gift tax exclusions,

there is also a unified

lifetime gift and estate

tax exclusion. We have

a federal estate tax

that is unified with the

gift tax.

There is a unified

lifetime exclusion that

stands at $5.34 million

for the rest of the 2014 calendar year. Each year there are adjustments to

account for inflation, so this figure may rise in 2015.

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Because of this unified lifetime exclusion, it is possible to give a tax-free gift to

someone within a calendar year that exceeds $14,000. If you do this, you would

be using a portion of your unified lifetime exclusion, so there would be less left

to apply to your estate after you pass away.

For example, let's say that you give $14,000 to your son on February 1st. You

could give this gift tax-free using your $14,000 per person annual gift tax

exclusion. At that point, all of your $5.34 million unified exclusion would be

available to you.

Later in the year, you decide to give your son an additional $1 million gift. To

give the gift tax-free, you would be using $1 million of your $5.34 million

lifetime exclusion. There would be $4.34 million remaining to apply to future

asset transfers.

CONCLUSION

The annual gift tax exclusion allows you to give up to $14,000 to any number of

gift recipients within a calendar year free of the gift tax. If you give more than

$14,000 to any one individual during a tax year, you would be using a portion of

your $5.34 million lifetime exclusion to give the gift tax-free.

If you are exposed to federal transfer taxes, you could use the $14,000 annual

gift tax exclusion to gain tax efficiency. This would enable you to transfer assets

tax-free without reducing your available lifetime exclusion.

If you want to obtain more in-depth information, schedule a consultation with a

licensed estate planning attorney.

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REFERENCES

IRS

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Gift-Tax

Forbes

http://www.forbes.com/sites/deborahljacobs/2013/11/01/the-2013-limits-on-

tax-free-gifts-what-you-need-to-know/

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About the Author Larry Parman

After helping his own family deal with a lengthy probate and a battle with the IRS following his father’s death in a farm accident, Larry made a decision to help families create effective estate plans designed to reduce taxes, and minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors. Following a dozen years in the investment banking and financial services business, in the mid-1980s Mr. Parman formed a law firm that gives families the peace of mind that comes from having created a premier estate and financial plan. After forming his law firm in 1984, he offered a series of public and private seminars to inform the public about using a Living Trust as the

foundation of a family’s estate plan. Today, Parman & Easterday is one of the leading business and estate planning law firms in the Midwest. The firm’s primary focus is on business and estate planning, elder law, asset protection, and providing effective estate planning solutions for clients. Today, the firm’s premier estate plan design is referred to as a Legacy Wealth Plan. Mr. Parman is a frequent guest on the radio and can be seen on television talk shows explaining the importance of proper estate planning. Prosperity Productions selected Mr. Parman as a featured speaker in a nationally-recognized educational video on Living Trusts. He is the author of numerous published articles on financial and estate planning matters and the co-author of two books, Estate Planning Basics: A Crash Course in Safeguarding Your Legacy and Guiding Those Left Behind in Oklahoma: Settling the Affairs of Your Loved Ones. Mr. Parman is a member and Fellow of the American Academy of Estate Planning Attorneys. He is also a member of the Oklahoma and Missouri Bar Associations, the American Bar Association, and the Oklahoma City Estate Planning Council.

www.ParmanLaw.com

OVERLAND PARK, KS 10740 Nall Avenue, Suite 160 Overland Park, KS 66211 Phone: (913) 385-9400 Fax: (913) 385-9422

OKLAHOMA CITY, OK 13913-B Quail Pointe Drive Oklahoma City, OK 73134 Phone: (405) 843-6100 Fax: (405) 917-7018