"You might think that you can give gifts without being taxed for your generosity. After all, if you give someone a cash gift, you are giving a portion of what is left after you paid taxes on your income.Learn more about Indianapolis gift tax exclusions in this presentation."

1. What Are the Gift Tax Exclusions? www.FrankKraft.com 1
There are many different facets to consider when you are engaged in your estate
planning efforts. Transferring assets is not always as simple as an exercise in pie
slicing.
You should carefully consider the impact that a direct inheritance can have on
each of your loved ones. If you act in a discerning manner, you can provide for
each person that you love in the optimal fashion.
With this in mind, we will look at the value of special needs trusts in this paper.
MEDICAID COVERAGE
You have probably heard of the Medicaid program. This is a health insurance
“You might think that you can give gifts without being taxed
for your generosity. After all, if you give someone a cash gift,
you are giving a portion of what is left after you paid taxes
on your income.”
WHAT ARE THE
INDIANAPOLIS GIFT
TAX EXCLUSIONS?
PAUL A. KRAFT
Indiana Estate Planning Attorney

2. What Are the Gift Tax Exclusions? www.FrankKraft.com 2
Unfortunately, this logic falls on deaf ears when it comes to the tax man. There is
a federal gift tax in place, and it has been around continuously since 1932.
To provide some historical background information, the estate tax was enacted in
1916. During the first few years, people who were exposed to the estate tax
gave gifts to their family members to avoid the tax.
The gift tax was enacted in 1924 to close this window of opportunity. Some
people were not happy with this arrangement, so pressure was applied, and the
gift tax was repealed in 1926. In 1932, the gift tax was reenacted, and it is been
around ever since then. During the 1970s, it was unified with the estate tax.
Everyone does not pay the estate tax or the gift tax, because there is a relatively
large unified credit or exclusion that allows you to transfer a certain amount tax-

3. What Are the Gift Tax Exclusions? www.FrankKraft.com 3
free. This unified exclusion stands at $5.43 million in 2015.
MARITAL DEDUCTION AND PORTABILITY
These transfer taxes only come into play when you transfer assets to someone
other than your spouse. If you are married, and your spouse is an American
citizen, you can transfer unlimited assets to your spouse free of taxation.
Plus, the estate tax is portable between spouses. After you pass away, your
surviving spouse could use your exclusion, and his or her own exclusion.
However, Internal Revenue Service Form 706 must be filed to opt for portability.

4. What Are the Gift Tax Exclusions? www.FrankKraft.com 4
TAX-FREE GIVING
In addition to the unified lifetime gift and estate tax exclusion, there are three
other gift tax exclusions that we would like to touch upon here. The most
significant one is the $14,000 per person, per year, gift tax exclusion.
Each individual taxpayer can give up to $14,000 to any number of gift recipients
within a calendar year tax-free. To be clear, this exclusion sits apart from the
unified lifetime exclusion. You could give $14,000 during this calendar year to
100 different people, and you would not be using any of your unified lifetime
exclusion.
The utilization of this exclusion can be part of an estate tax efficiency strategy.
To provide an example, if you are married, you and your spouse can combine
your respective annual exclusions. This would allow you to transfer $28,000 tax-
free to multiple family
members.
Let's say that you have
three married children. You
and your spouse could give
$28,000 to each husband
and wife every year without
incurring any transfer tax
liability. This can add up
over a number of years.
Direct gift giving is a
possibility, but you could
also use this exclusion to
fund certain types of trusts,
and it can be used to distribute shares in family limited partnerships.
In addition to the $14,000 per year, per person exclusion, there is also a medical
exclusion. If you want to pay medical bills for others, you can do this without
incurring any gift tax exposure. This exclusion also allows you to purchase health
insurance for the benefit of others.

5. What Are the Gift Tax Exclusions? www.FrankKraft.com 5
The last exclusion that we will look at is the educational exclusion. You are
allowed to pay school tuition for students free of the gift tax, as long as you pay
the institution directly.
This educational exclusion does not extend to books, fees, and living expenses.
However, you could use your $14,000 per year exclusion to provide additional
tax-free support to students.
SUMMARY
There is a gift tax in the United States, and it is unified with the estate tax.
However, there are exclusions that can be used to give gifts in a tax-free manner.
You can give up to $14,000 each year to any number of gift recipients tax-free. It
is also possible to pay medical bills and school tuition for students without
incurring any tax liability.
If you want to give more than $14,000 to others within a calendar year tax-free,
you could use a portion of your $5.43 million unified lifetime gift and estate tax
exclusion.
People who are exposed to the estate tax can take steps to ease the burden.
Tax-free giving can be part of the plan. To learn more, schedule a consultation
with a licensed estate planning attorney.

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REFERENCES
Internal Revenue Service
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-
Gift-Taxes
Forbes
http://www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-
estate-and-gift-tax-limits/

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About the Author
Paul A. Kraft
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms
in Indiana in the area of estate planning as well as business and tax planning.
Mr. Kraft assists clients primarily in the areas of estate
planning and administration, Medicaid planning, federal and
state taxation, real estate and corporate law, bringing the
added perspective of an accounting background to his work.
In addition to his practice, Mr. Kraft has lectured extensively
in the areas of living trust planning, Medicaid planning, and
presenting public and private seminars on the importance of
proper estate planning. He has also authored various articles
on estate planning and is a contributing author of LEGACY:
Plan, Protect, and Preserve Your Estate–Practical Answers
from America’s Foremost Estate Planning Attorneys.
Mr. Kraft is a co-founder of the Indiana Network of Estate
Planning Professionals, a charter member of the AmericanAcademy of Estate Planning
Attorneys and a founding member of the National Network of Estate Planning Attorneys. He is
also a member of the Indianapolis Bar Association, including the Taxation, Business Law and
Estate Planning sections; the Indiana State Bar Association, including the section on Taxation
Law; the Indiana CPA Society; and the Estate Planning Council of Indianapolis. Mr. Kraft is
admitted to practice law before the Supreme Court of Indiana, U.S. District Courts, and U.S.
Tax Court.
Frank & Kraft
A Professional Corporation
Attorneys at Law
www.FrankKraft.com
135 N. Pennsylvania Street Suite 1100
Indianapolis, IN46204-2485
Phone: (317) 684-1100
Fax: (317) 684-6111