Guide to Gifting Assets

The Income Tax, Estate Tax and Medicaid Implications of Gifting Assets



I.   Introduction & Overview


On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Authorization and Jobs Creation Act of 2010, known as the “2010 Act.”  The 2010 Act increased and extended the federal estate and GST tax exemptions for two years, 2011 and 2012, and for the first time increased the federal gift tax exemption to $5,000,000 per person.  At the end of 2012 President Obama singed legislation that set the Federal estate tax exemption and the GST tax exemption at 5,250,000 for the 2013 year and indexed it for inflation going forward and is currently set at $5,450,000 for 2016.  He also increased the federal gift tax exemption by the same amount per person.  The gift estate tax exemptions were indexed for inflation so that, in 2012, the exemption is $5,120,000 per person and 2016 these gift exemptions will be $5,450,000 tied to the estate tax exemptions.  The following chart shows the federal and state estate and gift GST tax exemptions for 2010 to 2016.






Federal Estate & GST

Tax Exemption

Federal Gift & GST

Tax Exemption

2006$1 million$2 million$1 million
2007$1 million$2 million$1 million
2008$1 million$2 million$1 million
2009$1 million$3.5 million$1 million
2010$1 millionNo Federal Estate Tax$1 million
2011$1 million$5 million$5 million
2012$1 million$5.12 million*$5.12 million*
2013$1 million$5.25 million$5.25 million
2014$1 million$5.34 million$5.34 million
2015$1 million$5.43 million$5.43 million
2016$1 million$5.45 million$5.45 million

NOTE: Massachusetts does not have a gift tax

*as indexed for inflation beginning in 2012


PLANNING NOTE:  Prior to the year 2010, the gift tax exemption was set at $1,000,000 while the estate tax exemption was increasing.  This was designed to prevent people from making large lifetime gifts without paying gift tax.  However, the government has given the taxpayers a gift by increasing the gift tax exemption to currently $5,450,000 per person in 2016.  This means that each taxpayer can give away up to $5,450,000 without paying any gift tax.


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