Uniform Transfer Tax
Candlefocus EditorThe Uniform Transfer Tax is a merger of the federal gift and estate taxes into a single tax. It is used to prevent individuals from transferring assets from one individual to another without receiving anything or receiving less than market value in return. The uniform transfer tax can be an asset tax, gift tax, or even an estate tax.
How does the Uniform Transfer Tax Work?
When an individual transfers title of an asset such as Real Property, Stocks, Bonds or other investments from one individual to another, the formalized documents are signed and registered. The asset is then transferred on the records and the value of the asset is determined with market value calculations.
The amount of the tax paid is based on the fair market value of the asset transferred. A uniform transfer tax is due if the value of the asset transferred exceeds the uniform gift tax rate, which is currently set at $11,180,000.
In the case of an estate tax, as opposed to a gift tax, the tax base is the value of the estate, not the taxable amount passed on when the estate is closed. The taxable amount for estates are determined by adding the total Probate and Administrative Fees, along with any taxes owed to the state, to the inheritance itself.
The Beneficiary of the Uniform Tax Credit
The uniform tax credit can be used by taxpayers to reduce their estate taxes and probate costs. The credit allows taxpayers to give away their gift tax deduction prior to their death. This can benefit heirs as they receive a larger inheritance than they would if the donor had kept the deduction.
Conclusion
The Uniform Transfer Tax is designed to prevent individuals from avoiding or reducing taxes by transferring assets without fulfilling their obligations to pay or obtain value for the asset. The uniform tax credit can be a welcomed relief to taxpayers looking to reduce their estate taxes and administrative fees. However, taxpayers must take into account the additional taxes and fees associated with the asset transfer when evaluating the financial implications of their decision.