|Posted by Hundallegalgroup@gmail.com on March 14, 2017 at 3:50 PM|
You work hard, pay your share of taxes, yet even after your death, Good Ol’ Uncle Sam still comes knocking for more! Even after a lifelong commitment to paying taxes, the federal government wants to collect more by way of estate tax. The good news is that for the majority of individuals and married couples, the current federal estate and gift tax exemption limit allows for the transfer of wealth to heirs tax-free.
Still, informing and familiarizing yourself with estate tax is crucial. The federal estate and gift tax exemption is at an unprecedented $5.45 million per individual (which adjusts for inflation) for 2016, with a tax rate of 40% for any amount in excess of this limit. This means that an individual can leave $5.45 million to heirs and pay no federal estate or gift tax, and a married couple can effectively transfer $10.9 million tax-free (assuming a proper election is timely made upon the death of the first spouse, known as “portability”). Those with net worth’s in excess of the estate and gift tax limit require special planning to minimize and possibly eliminate their tax liability.
Current IRS regulations have been under heavy criticism for allowing the transfer of large amounts of wealth tax-free. President Donald Trump wants to repeal the tax altogether. Further, House democrats have proposed to slash the estate tax exemption from $5.45 million down to $3.5 million, and raise the tax rate to 45%. Most recently, the Treasury has enacted regulations to limit the favorable valuation discounts that are used in Limited Family Partnerships and Family LLC’s, an effective estate planning strategy to protect wealthy family businesses.
Given the uncertain future of the federal estate tax, it is important to plan ahead and have an estate plan drafted that will not only maximize current regulations, but also be adaptable for changes to come.
This information does not constitute legal advice or an attorney client relationship*