♠ Posted by Marc J. Soss in estate planning,florida estate planning,florida probate attorney,Last Will and Testament,Revocable Trust,Sarasota attorney at Monday, September 21, 2015
It
is estimated that on January 1, 2016, the federal estate and gift tax exemption
will rise to $5.45 million (up from $5.43 million). This would allow a married couple to shield
$10.9 million from federal estate taxes. With the top federal estate tax rate at
40%, this number is important to individuals who try to decrease the size of
their estates and avoid the tax. Over the years, the exemption amount has risen
from $675,000 in 2001, $1.0 million in 2003, $2.0 million in 2008, until it was
set at $5 million in 2011, and indexed for inflation.
It
is important to note that the gift tax is tied to the estate tax, so the
inflation indexing helps individuals make the most of tax-free lifetime giving
too. This increase in the exemption
amount will allow an individual, who previously made a $5 million gift to their
children to provide them with an additional $450,000.
Separate and distinct from the federal estate and gift tax exemption is the annual gift tax exclusion
amount. In 2016, it is projected to remain at $14,000 (the same as 2014-2015).
The annual gift tax exclusion allows individuals to gift the sum of $14,000 to
as many individuals as they desire without any gift tax consequences. A husband and wife can make a joint gift of
$28,000. It is important to consider the federal kiddie tax when making gifts
to young individuals and students through the age of 23, since the young
individual pays no tax on the first $1,050 of unearned income and then a 15%
rate on the next $1,000. Investment income, above these small amounts, will
then be taxed at the parent’s tax bracket.
