ESTATE AND GIFT TAX EXEMPTION ANNOUNCED FOR 2015 GIFT TAX ANNUAL EXCLUSION REMAINS UNCHANGED

By Jeffrey K. Eisen

The combined estate and gift tax exemption was set at $5,000,000 in 2011, but indexed for inflation. For deaths in 2014 and for gifts made in 2014, the inflation-adjusted exemption was $5,340,000. The IRS has announced that for deaths or gifts in 2015, the exemption amount will increase to $5,430,000. Thus, in only four years, the amount a married couple can gift or bequeath without incurring estate or gift tax has increased from $10,000,000 to almost $10,900,000. This increase of nearly $900,000 has come despite historically low inflation, and saves $360,000 in estate/gift tax.

This $5,430,000 exemption also applies for purposes of the Generation-Skipping Transfer Tax (“GST Tax”).

If your estate plan was prepared before 2011, and the amounts some beneficiaries receive are based on the estate tax exemption amount or the GST Tax exemption amount, while other beneficiaries receive your estate in excess of these exemptions, it is time to take a look at your plan again, since the exemptions are so much higher now.

The annual gift tax exclusion (the amount that a donor can give away each year to as many donees as the donor wants, without using any of the donor’s $5,430,000 exemption) remains at $14,000 for 2015. Under Congress’ version of rounding, which is not what we all learned in middle school, until the inflation adjustment would actually put the annual exclusion amount at $15,000 or greater, it will remain at $14,000. (Thus, even if the inflation adjusted amount would be $14,999, it would remain at $14,000.)

With year-end approaching, if you plan on taking advantage of this “use it or lose it” annual exclusion, remember that in order for a gift to count as made in 2014, your check to a donee must clear your bank on or before December 31.

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