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IRS Updates Estate and Gift Tax Limits for 2017

December 05, 2016

2017 estate tax limits have increased...has the gift tax exclusion increased, too?

Be aware that estate and gift tax limits for the New Year are slightly different than 2016’s limits. For 2017, an individual is able to leave $5.49 million (just shy of $11 million for married couples) to his/her heirs without being tacked with federal estate or gift tax. This is up from the 2016 limit of $5.45 million per individual.

What’s new for 2017?

Individuals?
Tax free inheritances of $5.49 million can be made in 2017, and for high net worth individuals trying to cut down their estates to stay below the threshold, this $40,000 increase is important. The top tax rate on amounts that exceed the exemption limit remains 40% for the New Year.

Married couples?
For married couples, each spouse gets his/her own exemption, meaning that in 2017, couples can give away a combined total of $10.98 million tax free ($5.49 million each), an $80,000 increase from last year. This extra 80 grand can allow a couple to fund a generation skipping trust (the generation skipping transfer tax exemption will also increase to $5.49 million in 2017) or pre-fund an Irrevocable Life Insurance Trust (ILIT) for future premium payments, for example.

Has the annual gift tax exclusion changed at all?

No, the annual gift exclusion remains at $14,000 for the New Year. In fact, it has remained $14,000 since 2013. You are able to give away $14,000 (free of gift tax) to as many individuals as you want. For married couples, you and your spouse can make a combined $28,000 of contributions to an unspecified number of individuals.

Bear in mind that making the gifts during your lifetime means that you must keep record of all your taxable gifts (over and above the annual exclusion gifting), since they count against the amount of the eventual estate tax exemption.

Could Trump change these limits at all?

President-elect Donald Trump allegedly wants to repeal the federal estate tax, but for now it is uncertain whether he will go through with it or not. In place of the tax, he wants to impose a new carryover basis regime for estates exceeding $10 million.

It’s important to note these are federal changes, and specific state gift, estate and/or inheritance tax implications should be considered when making decisions about when and how much to gift and/or bequeath.

Questions? Contact any member of our Tax Services Team.

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