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At least once a year, it may a good idea to review estate planning rules and laws as they may change. For instance, the estate tax exemption has risen each year since 2011 with inflation. In 2015, the estate exemption is $5.43 million, which is a $90,000 raise since 2014. However, those who have made gifts in excess of the annual gift limit may have eaten into some or all of that exemption.
In 2015, individuals can give gifts of up to $14,000 per person without having to pay taxes or report the gift to the IRS. While the gift tax exclusion is also indexed for inflation, it will stay the same as it was in 2014. However, there are some gifts that may not impact an individual’s gift tax or estate tax situation. For instance, gifts given to charity, health or education expenses paid directly to the institution do not count toward either limit.
Married couples may wish to update any estate planning documents that were made before portability became a standard part of the estate tax law. It effectively allows a married couple to double their estate tax exclusion. This is because one spouse can use whatever portion of the other spouse’s exemption is left over after the first spouse passes away.
Effective estate tax planning may enable an individual or a couple to reduce the amount of estate tax paid. Estate planning may be made easier by talking to an attorney to create a plan that reduces taxes and maximizes benefits to future generations. An attorney may be able to create documents or provide advice that may increase the odds of an estate plan standing up to any legal challenges it may face in the future.