Transferring assets

Transferring your assets can occur either through a gift or by inheritance.  Gifts are defined as transfers made during an individual’s lifetime while inheritances are those transfers made after someone’s death.

If gifts or estates involve large transfers of money or property, they may be subject to a federal tax as well.  While most gifts and estates are exempt from taxes, it is often the case that some people will try to circumvent tax laws by making attempts to avoid paying the gift or estate taxes.  This can result in charges of tax evasion, failure to file or falsifying returns.

The Gift Tax

The gift tax can be applied to any transfer of income or property from one individual to another.  However, there are so many exemptions that sometimes the gift tax is applicable only in a small number of cases.

An annual exclusion is the amount of money that an individual can gift without incurring taxes.  The maximum amount is set at $13,000 for a single person and he/that individual she can gift as many people as they wish providing that they stay within the maximum amount.  For married people, the annual exclusion is set at $10,000. Other exemptions that are applicable for gift taxes include:

  1. Gifts made to educational institutions for the purpose of tuition
  2. Medical institutions for medical expense
  3. Political organizations
  4. Charitable organizations
  5. Gifts among spouses


If a gift was made that does not fall under these exceptions and exceeds the annual exclusion amount, you are required to report and pay taxes on the gift.  If you fail to follow the guidelines on reporting gifts in excess of the allowed amount, you can be charged with tax evasion.

However, even if a gift does not fit into one of these exceptions and exceeds the annual exclusion, most gifts will still not be subject to tax since each taxpayer has a unified credit they can use for taxable gifts and estates.  This credit allows over $5 million in taxable gifts to be made tax-free over a lifetime.

The Estate Tax

The taxable estate includes all property an individual owned at the time of death plus any gifts made in the three years prior to death.  Like gifts, most estates are exempt from tax by way of exclusions and deductions.  Furthermore, the same unified credit that can be used towards taxable gifts can also be applied towards a taxable estate.

There are a number of exceptions to the estate tax.  Allowable deductions include funeral costs, debt owed at time of death and any property transferred to a surviving spouse.  If any part of the estate does not fall under these exemptions, you are required to file with the IRS.  Failure to file can result in tax evasion or failure to file charges.

New York State Estate Tax

In addition to federal taxes, New York also has a state estate tax.  This tax is applicable to individuals who are residents of the state of New York or own property located in New York and that the estate exceeds $1 million in value.

Tax evasion related to gift and estate tax carries heavy penalties so it’s wise to be diligent about accuracy when claiming exemptions on any and all of your assets.

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