For gifts made in 2007 and thereafter the annual exclusion has been increased to $12,000 per recipient. Since 1997, the excludable amount has been indexed for inflation, but will only move in $1,000 increments. With gift-splitting, spouses may transfer $24,000 per recipient per year without gift tax even if one spouse owns all of the property. The consent of the spouse not owning property must be signified on the gift tax returns.
Also, an unlimited gift tax exclusion is allowed for amounts paid on behalf of a donee directly to an educational organization for tuition and to a health care provider for medical services.
For a gift in trust, each beneficiary is treated as a separate person for purposes of the exclusion. The annual exclusion is not available for gifts of future interests such as a remainder interest in a trust or life estate, except for gifts to minors in trust or under the Uniform Gift to Minors Act.
Gifts given within three years of death generally will not be included in the deceased donor’s estate. (The taxable portion of gifts would be included in the tax base for estate tax computations.) However, gifts with retained life estates, transfers effective at death, revocable transfers, transfers of general powers of appointment and transfers of life insurance will be included in the estate. The three year rule was retained for redemption of stock to pay estate taxes, special valuation of certain farm property, extension of time to pay estate tax, and for determining property subject to a lien for taxes.
Beginning in 2004, the gift tax exemption equivalent will remain at $1,000,000 even though the estate tax equivalent exemption continues to increase. In 2010, although estate taxes will be eliminated, gift taxes will remain in effect with a maximum rate of 35 percent and a $1,000,000 exemption equivalent amount.
2009
Federal Gift Taxes
Metes and Bounds
Do you remember those old Pirate movies and cartoons, where they locate buried treasure by measuring off paces. They were basically using the metes and bounds system.
Metes is an Old English word for distance and bounds refers to direction. This surveying system identified the property’s boundaries by walking the reader along its path.
Just as in the old Pirate cartoons and movies, the metes and bounds system makes use of monuments, both natural or artificial, such as trees, boulders, stakes and concrete markers. In fact, the metes and bounds system usually begins and ends with a monument.
The metes and bounds approach includes three elements:
- Point of Beginning. The POB is where the survey description begins, and is usually established relative to a clearly defined monument. It is usually one corner of the property’s boundaries. For example, the POB may begin 100′ from the street corner.
- Distances. In the U.S., the distance is usually described in feet.
- Directions. At the corners of each parcel of property, the survey indicates which way the boundary line turns with compass bearings (adjusted to true north, NOT magnetic north). Compass bearings are measured in degrees (360 degrees in a full circle), minutes (60 minutes in each degree) and seconds (60 seconds in each minute). Note that the turn’s compass bearing is not angle-measured from boundary, but from true north.