The Federal and Gift Tax is a tax on the transfer of assets while alive or at the time of death.
Who is affected by Estate Taxes? The heirs of people who are worth more than $5,450,000 when they die.
The law provides that:
Individuals can give up to $14,000 per year to as many individuals as they wish, tax free. A married couple can jointly give twice that amount.
Individuals can give, while alive or at death, an unlimited amount of wealth to their spouse, as long as they are U.S. citizens.
In addition, individuals can give, while alive, up to $5,450,000 by using their tax credits.
There is a credit against Estate Taxes of $2,125,800. That is the tax on the first $5,450,000. Thereafter, taxes are payable at a rate of up to 40%. Taxes are due nine months after death.
A "Bypass Trust" allows a married couple to use both spouses' $5,450,000 exemption equivalent. This results in a minimum of $10,900,000 being sheltered from estate tax rather than just the $5,450,000 which results when only the unlimited marital deduction is used.