I find that inheritance tax or estate taxes are the most misunderstood concepts in the U.S.
It is really very simple: Right now, all of us get to give away at death or during our lifetime a total of $5.5M without anyone paying any taxes on it. That’s right $5.5M.
So what about this $14K limit I heard about. Here’s how that works:
Notice I said you could give away up to $5.5M at death or during your lifetime? That is called your lifetime estate exemption. But if you give someone a gift under $14K in a year, it does NOT count against that exemption.
Example: You give 10 people a gift of $14,000 each. NO ONE PAYS TAXES AND nothing is subtracted from your lifetime exemption.
Another Example: You give someone a gift of $200,000. STILL NO ONE PAYS TAXES! However, $14K is subtracted from your lifetime exemption. So, in this case, $186,000 IS subtracted. ($200,000 – $14,000 = $186,000) This means you can now gift away up to $5,314,000 in the future without anyone paying any taxes.
But remember, in all cases, the first $14K to any one person is NOT COUNTED.
Hope this makes sense. I remember winning many bets (even from accountants) on this topic!
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