LARGE LIFETIME GIFTS

If you give over your maximum lifetime exemption (currently $675,000), you will need to pay a gift tax.. If you survive three years, the gift tax is deducted from the estate. That saves substantial taxes. For example, assume a heavy hitter with $10 million. If they leave it at death, and we assume a flat 50% tax, then $5 million is left for the beneficiaries.

But if you gave away $5 million, minus

5 million gift and 2.5 million of gift tax leaves a

2.5 million estate; then

1.25 million of estate tax leaves

1.25 million which, added to the 5 million gift totals

6.25 million.