Taking Advantage of Medical Gift Tax Exemption

Taking Advantage of Medical Gift Tax Exemption

When you are looking for ways to reduce the taxable value of your estate there are a number of strategies than can be implemented. The ideal combination is going to vary depending on the specific nature of your assets, but there are some things that can be done by just about everyone. One of these is the practice of giving tax free gifts.

The new law that went into effect recently that is being called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 impacted estate planning in a number of ways. The most profound provisions were the increase in the estate tax exclusion up to $5 million from the $1 million amount that had previously been scheduled and the reduction in the rate of the tax. According to the law as it stood throughout most of 2010 the maximum rate was scheduled to be 55%, but as a result of this new measure it is now 35%, and this rate will remain in effect through 2012.

The gift tax was also affected by the Tax Relief, Unemployment Insurance Reauthorization, and Job

Creation Act of 2010. The lifetime exemption was raised to $5 million, matching the estate tax with which it is unified. Since the two are indeed unified, your estate tax exclusion is reduced by the amount of any tax free gifts that you give using the lifetime gift tax exemption. So giving gifts using this exemption is not going to provide you with any direct estate tax efficiency.

However, there is a gift tax exemption that many people are unaware of that you can use without impacting your lifetime exemption. Each individual can pay the medical bills of an unlimited number of people as a gift free of the gift tax. This can be a life saving gift to a friend or family member in need, and you can also pay for the health insurance of as many people as you want to as a tax free gift.

With the cost of health care these days medical gifts can go a long way toward reducing the taxable value of your estate, and at the same time you are providing something of immeasurable worth to someone in need.

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