Understanding Gift Tax Changes for Same-Sex Couples

August 5th, 2015

The Supreme Court's recent ruling in Obergefell v Hodges provided same-sex couples with a number of new rights and tax benefits that they didn't have under previous laws. One of the most notable changes affected gift tax exclusion laws.

About Gift and Estate Taxes

Federal laws require individuals in the United States to pay gift tax on gifts they give in excess of a certain value. Currently, the annual gift tax exemption limit is set at $14,000 per person per year. If a gift is given in excess of this limit, the excess will count against your lifetime exclusion limit, which is currently set at $5.43 million. This limit is adjusted each year to account for inflation. After reaching this limit, the remainder of your gifts and/or the excess value of your estate after death will be subject to taxation.

Perks for Married Couples

Married couples enjoy several exclusive gift and estate tax benefits. Before the U.S. Supreme Court legalized same-sex marriage, same-sex couples didn't have access to any of the gift tax benefits married couples receive. However, thanks to this ruling, same-sex couples who choose to marry can start taking advantage of all of these perks. Some of these benefits include:

  • Portability - When one spouse dies without using the full amount of his or her lifetime gift/estate tax exclusion allowance, this rule allows the other spouse to use the remaining amount in addition to his or her own allowance.

  • Gift-Splitting - Each year, married couples can combine their annual gift tax exclusion allowances for tax purposes. This means that the couple can give gifts of up to $28,000 to a single recipient during the year without incurring any gift taxes or using any portion of either spouse's lifetime exclusion amount.

  • Unlimited gifts to one another - Spouses can give unlimited gifts to one another during life or after death without owing any tax.

Using these benefits to your advantage may help you to reduce and/or eliminate your future estate taxes. Our estate planning team can help you understand exactly what these are and help you establish a step by step estate planning process. Call us now at 1-937-898-5583 to set up a consultation.