Estate and gift taxes are imposed when a sum above a certain amount is transferred from one person to the other outside of business dealings. Estate tax is the name for this transfer after the person giving the money has died. This money could be coming from a will or a trust fund, for example. Gift tax refers to when a person transfers some of their wealth while they are still alive.
This blog will serve as a brief overview on estate tax and gift tax and the differences between.
All estates must file a tax return if the value of the estate, minus some permissible deductions, exceeds a specified amount. This amount changes each year, but in 2017, the figure is $5.49 million. If the figure is lower than this amount, the person's estate will be exempt of tax, but this law is subject to change. Marital deduction can occur when a deceased person has expressed a wish in their will to transfer their wealth to their spouse. This will mean that no tax is applicable. However, if that spouse wishes to further transfer his or her wealth onto another person, he or she may still be subject to tax.
Gift tax is a transfer of monetary value between two living individuals. This will be tax-free if the gifts transferred to one individual does not exceed $14,000 as per each calendar year. Gifts to a spouse, or payment for medical expenses on someone else's behalf, will not be taxed.
If you have any questions on estate administration, it is a good idea to speak to a trusted legal advisor.
Source: Find law, "Estate and gift tax: an overview," accessed July 28, 2017