Inflation has triggered substantial increases in the federal estate and gift tax limit since the early 2000s. Once again the limit is projected to experience another hike in 2016. Since 2001, the estate tax limit has risen from $675,000 to $5.43 million, an astounding increment that has made avoiding taxes that much easier for the country’s elite. In 2016, the estate and gift tax limit is projected to rise to $5.45 million.
The astounding part is that this amount is calculated per spouse, meaning that a married couple can leave or gift a maximum of $10.9 million, an amount that is not subjected to federal estate taxes. Don’t let the exorbitant number of $10.9 million fool you, however. While an unlimited marital deduction will allow a spouse to leave all or part of his assets to his surviving spouse free of federal estate tax, his spouse may only utilize his unused federal tax exemption had they previously elected for portability. Portability allows a surviving spouse to utilize the unused tax exemption of their deceased spouse. Even if you don’t possess the necessary monetary amount to reach the $5.45 million, incidents such as winning the lottery or inheriting a large sum may change that standing.
Gift tax regulations
The gift tax and estate taxes essentially adhere to the same limit. Gifts can be given anytime during one’s lifetime, though they must be kept track of and may not exceed the limit while remaining untaxed. A gift of $5 million from 2012, for example, could now be increased by $450,000 to reach the new limit established for 2016. Gifts made directly to providers to help with medical, dental, or tuition expenses will not count against the lifetime gift limit.
Stay current with the Kelley & Fulton blog for more information about new financial regulations that may be relevant to you and your family. If you find yourself in financial trouble and don’t know where to turn, Kelley & Fulton can certainly help. We invite you to schedule an initial consultation with an experienced bankruptcy lawyer in West Palm Beach today.