Federal Estate and Gift Taxes (Essay Sample)

Federal Estate and Gift Taxes
For a long time, Federal estate tax has been a head ache to many affluent Americans. Leaving inheritance and offering gifts to their children have been a very expensive affair prior to 2014. This has been due to the high tax that was attracted by any American who wished to offer gifts to their children or even leave some inheritance. Previously Americans paid up to 50% in tax when transferring assets worth $1.5 million and gifting above $13,000. It means that an American who had an estate worthy $5 million dollar, and dies. He owed the federal government $2.5 million dollars in tax and the heir would receive only $2.5 million dollars. This is enough reason for affluent people to wail. But there are good news to all those who have something to leave to their children and those who would like to gift. The new estate tax and income tax law has made life more bearable and there are various reasons for Americans to smile.
First, Americans can now gift up to $14,000 up from $13,000. To add the icing on the cake is that gifting is not cumulative. It therefore means that with gift splitting; for couples, a parent with married children can gift $28,000 to his children at a go for as many times as possible in a year. The recipient of this gift does not even need to notify the government. The only time that the federal government should know is if the gift is received from a foreign source. Moreover, gift of value above $14,000 will attract 40% tax down from the previous 50%.
Secondly, for affluent Americans, they can now pass on in peace. This is because estate is adjusted to inflation annually. This year; 2014, Americans can inherit up to $5.34 million dollars tax free. The new law allows Americans to hold assets to death and upon death; their children can forego the capital gain tax. This means that if an elderly the deceased acquired an asset at an initial value of $1 million dollars and has appreciated to $3 million dollars. The heir is not entitled to pay tax for the gains accrued.
It is therefore now easy for parents to pass properties of up to $5.34 million to the heir without paying taxes. This registration is a piece of good news to the Americans for they can now hold assets till death and avoid capital gain taxes over the years. If an American decides to dispose assets that have appreciated overtime, he will owe the government capital tax of up to 23% but if he holds to the asset till death, this tax will vanish. It is therefore more preferred to hold on to assets till death (Wall Street Journal, October 12).
It is difficult to evade Estate taxes in the United States are. The new law will compel those persons who have established trust to consider crafting new trusts or where possible review the existing one. The new estate and gift tax laws will have far reaching implication on inheritance. This law has left many of Americans out of estate transfer tax obligation (Wall Street Journal, October 1). Previously Americans would pay about 50% in estate tax for transfer of assets worth more than $1.5 million and couples to set up a trust in order to be exempted from taxes for assets. But currently the couples don’t require a trust. The new law is a relief to affluent Americans as they have nothing to fear for holding assets till death. however, longer capital tax gains has increased from the previous rate of 15% to 23.8% but the margin cannot compensate revenue that will be lost by exemption a good number of Americans from estate tax (Wall Street Journal, October 12 ).
Previous gift tax laws allowed a cap of $14,000 in 2012 million but the current registration have put it at a maximum of $14,000 per per...