Every year the Internal Revenue Service (IRS) reviews the estate and gift tax exemption limits and decides whether the exemption amounts need to be changed based on inflation. When you created your estate plan you may have given little thought to these exemption limits. The amounts seemed so high that they could never be applicable to you. However, now your financial situation has changed. Whether you worked hard in a lucrative career, made smart investments, or inherited a lot of money, you are now concerned about how much you will pay the federal and state governments if you make a gift to a loved one or die in 2015.
The 2015 Limits
In October 2014, the IRS announced that:
- There would be no change in the annual gift tax exemption. You can still give $14,000 to each recipient without incurring any tax penalty.
- The estate tax exemption increased by $90,000. In 2014, the federal estate tax exemption was $5.34 million. In 2015, the federal estate tax exemption is $5.43 million.
Whether the change in the estate tax exemption is enough to have you modify your estate plan depends on the specific terms of your will and trusts. However, if you are unsure then it is important to find out the answer. It is important to be confident that as much of your estate will pass to your intended beneficiaries instead of to the government should anything happen to you this year.
For more information about modifying your estate plan, please read our free pamphlet, The Ten Things You Must Know Before Creating (or Amending) Your Will or Trust.