What is the difference between an estate tax and a gift tax?

Answer 1

Estate taxes are the taxes imposed on a decedents estate, whether state, federal or both) to remove the property out of the decedents name and placed into a living beneficiary's name. A gift tax is a tax on any gifted amount over the maximum lifetime gifts made by an individual from their estate to another party. This gift tax is paid by the individual giving the gift, not the person receiving the gift. The federal amount per person for a gift changes and you must keep note of this, however this gifted amount can be given each year to any number of people with no gift tax so long as it is under the maximum life amount for gifting under the uniform gifting code.

Answer 2

The Estate Tax and Gift Tax are very interconnected. But first you need to make sure you are talking about the Estate Tax reported on Form 706. This is for taxpayers who have over $5 million is assets at the time of their death or have given away over $5million in gifts reported on the Gift Tax Return.

While living we can all give gifts to up to an annual exclusion amount per person. Currently it's $13,000. Give someone more than that, you might need to do a Gift Tax return (Form 709). The amounts over the annual exclusions subtracts from the $5 million (or what ever it is that year) that triggers the Estate Tax.

Whether you give it away before you die or leave it to your beneficiaries at your death, there is only so much that is not taxed.