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The "Taxpayer Relief Act" signed on January 2, 2013, permanently sets the estate and gift tax exemption at $5,000,000 and the top tax rate at 40%. The exemption amount is adjusted annually for inflation, which puts the 2012 exemption at $5,120,000 and the 2013 exemption at $5,250,000.
Basically that means that you will not have to pay gift tax unless the amount of your lifetime gifts exceed the $5,000,000 amount (adjusted for inflation). However, you will need to file a gift tax return for 2013 such as Form 709 with the IRS to report the amount of gift made which will reduce your $5,000,000 (inflation adjusted) exemption by the amount of the gift.
In addition, you can give up to $14,000 per year per individual without having to file a gift tax return and without it reducing your lifetime gift exemption of $5,000,000 (inflation adjusted).
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You have been very helpful. I was concerned that she would have to pay gift taxes and I knew about the $5,000,000 one time gift but didn't know how to report it and/or if had to pay any taxes on the gift. Again, thankyou for your help. I'll probably be getting back to you from time to time as we wrap up our estate and prepare it for payout at death.