Although many families do not have to worry about the Federal Estate and Gift Tax, but for those who do, failing to plan for this tax can cost families severely when you pass away. A certain percentage of your estate is exempt from Federal Estate Tax and this exemption is adjusted annually for inflation. Yesterday, October 25, 2016, the IRS announced the exemption would rise from $5.45 million in 2016 to $5.49 million in 2017. This means that only those estates that are worth more than $5.49 million if you were to pass away in 2017 will be subject to the Federal Estate and Gift Tax.
Because the Federal Estate Tax rules allow for portability, meaning the surviving spouse is allowed to use the unused portion of the estate tax exemption of the first spouse to die, the $5.49 million estate tax exemption could effectively create a $10.98 million exemption if the portability elections are used correctly.
As you can see, the Federal Estate and Gift Tax is only going to apply to a small number of estates. But, for those where it does, the taxes can be significant. There are several ways to reduce an estate from unnecessary estate tax liability, including establishing a trust and an aggressive gifting strategy or establishing a charitable remainder trust or a charitable lead trust.
Whether your concern is avoiding estate taxes, making your estate settlement simple, avoiding probate, or avoiding nursing home poverty, if you’d like to have your plan set up the right way, the first time, call our Marietta estate planning team at (678) 809-4922.