2015 Year-End Estate Tax Planning


In 2015, the federal estate tax exemption is $5.43 million.  With little planning, a married couple can pass up to $10.86 million worth of assets to heirs, so no estate tax will be due.  Those numbers will increase in the future with inflation.

With such a large exemption, you may think that estate tax planning is unnecessary.  However, nearly half of all states have an estate tax or an inheritance tax (Louisiana does not).  The tax rate goes up to 16% in many states, or even higher in some.

What’s more, state estate tax exemptions tend to be lower than the federal exemption; in some states, there is virtually no exemption for certain estates.  Therefore, you may find year-end estate tax planning to be advantageous, even if you don’t anticipate having an estate over $5 – $10 million.

Employing the Exclusion

In terms of year-end planning, anyone with estate tax planning concerns (federal or state) should consider gifts that utilize the annual gift tax exclusion, which is $14,000 in 2015.  That is, you can give up to $14,000 worth of assets to any number of recipients, with no tax consequences.  Furthermore, these gifts do not require tax filings.

Married taxpayers can gift up to $28,000 per recipient by way of joint accounts or split-gifts.  Larger gifts may not be taxed due to the lifetime gift tax exemption, but you will be required to file gift tax returns that could result in future tax consequences.

Regardless of the purpose or recipient of gifts, it is important to remember that there is no spillover from one year to the next.  If you miss making gifts in 2015, you cannot double up gifts in 2016.  Moreover, be sure that gifts are completed – checks must be cashed – by December 31.  Therefore, you should put your plans for gifting assets in motion well before year end.

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