If you have been quite successful financially, you must be aware of federal transfer taxes when you are planning your estate. One of them is the generation-skipping transfer tax.
Before we look at this tax, we should explain the other taxes on asset transfers, because they are all unified.
The federal estate tax is the first transfer tax that we will cover. This tax is potentially applicable on postmortem asset transfers to anyone other than your spouse.
There is an unlimited marital deduction, and you can use this deduction to leave unlimited property to your spouse free of the estate tax, as long as your spouse is an American citizen.
The maximum rate of the estate tax is 40 percent, and the exclusion is $5.43 million in 2015. The exclusion is the amount that you can transfer tax-free, so most people are exempt from the tax.
Federal Gift Tax
There is also a federal gift tax, and it stops people from giving large gifts while they are living to sidestep the death tax. Because the gift tax and the estate tax are unified, the exclusion applies to lifetime gifting coupled with the value of your estate.
The 40 percent top rate applies to gift giving, and the marital deduction also extends to lifetime gifting.
Generation-Skipping Transfer Tax
Now that we have looked at the gift tax and the estate tax, we can provide a basic explanation of the generation-skipping transfer tax. This tax can be applicable on asset transfers to family members who are more than one generation younger than you are.
The generation-skipping transfer tax could also be applied on transfers to people who are not related to you who are at least 37.5 your junior. Once again, because these taxes are unified, the $5.43 million exclusion that we have in 2015 applies to the generation-skipping transfer tax as well.
Free Estate Tax Report
We have devoted considerable resources toward the creation of an electronic library. You can access the titles through this website, and these reports cover many different estate planning and elder law topics.
There is a report that takes an in-depth look at the federal estate tax and the other taxes that can be applicable on large asset transfers. This report is free, and it will provide you with a great deal of sound information.
To access your copy of the report, visit this page and follow the simple instructions: Free Estate Tax Report.
Take Action
Our firm can help if you would like to put an estate plan in place, whether you have transfer tax exposure or not. We offer free consultations, and you can send us a message through our contact page to set up an appointment: Bucks County PA Estate Planning Attorneys.
Joe Masiuk, Estate Planning Attorney
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