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IRS Announces New Provisions Affecting Estate Planning

On Thursday, October 30, the IRS announced annual inflation adjustments for various 2015 tax provisions.  Two figures to note in the estate planning arena are the Federal estate (basic) lifetime exclusion, and the annual exclusion for gifts. 

The Federal estate tax exemption increased to $5,430,000 for 2015, roughly a 1.7% increase from 2014’s $5,340,000.  For more information on estate planning and the basics of portability, please see our previous blog post here.

Estate Tax Exemption Likely to Increase in Maryland

marylandLate last week, the Maryland Senate passed a measure that will gradually raise Maryland’s $1 million estate tax exemption to match the much-higher federal exemption. The measure has already passed the House. If signed into law by Governor O’Malley, in 2015 the exemption will be $1.5 million and in 2016, it will be raised to $2 million. The increase will continue to rise to $3 million in 2017 and $4 million in 2018 before matching the federal exemption in 2019. The federal exemption is currently at $5.34 million for 2014, and indexed to inflation each year.

The Wealth Transfer Silver Lining in the Current Economic Downturn

Almost all of us have been impacted in one way or another by the current recession.  Even prosperous and successful investors and business owners have seen the value of their investments and business interests dwindle in the face of the “Great Recession.”  Although it appears the dark clouds of economic strife have slowly begun to clear on the horizon, the current economy still presents a silver lining opportunity for those individuals and businesses contemplating a transfer of family business holdings, real estate or other investments to the next generation. 

Estate Planning and the Basics of Portability

estate planningThe estate tax landscape has a ‘permanent’ playing field now; the current Federal legislation exists in such a way that the rules will remain consistent for the foreseeable future. Back in 2010, estate tax was in a period of uncertainty due to the expiration of the Bush-era tax rules. Then the American Taxpayer Relief Act of 2012 created permanent estate and gift transfer tax laws, thereby providing a standard, predictable set of rules for estate planning.

The American Taxpayer Relief Act made the federal estate tax exemption permanent at $5 million, indexed for inflation, which now stands at $5,340,000 for individuals who pass in 2014. A federally-taxable estate is one above the current exemption where the decedent’s gross assets exceed allowable deductions, including those assets transferring to the surviving spouse. In other words, a decedent’s estate would not pay estate tax (40%) until the estate’s net assets exceeded $5,340,000.

Where Do We Stand on the Bush Tax Cut Extension and Estate Tax?

Much has been written in the general press concerning the fate of the “Bush Tax Cuts” from legislation expiring during the current calendar year; 2010 is the last year for reductions in income tax rates for all taxpayers.

There is very little legislative time remaining before the mid-term elections this coming November.  While the Congress has indicated extensions of certain Bush-era tax rate cuts will continue for the majority of American taxpayers, there is much squabbling over continuing of rate reductions for those individuals earning $200,000 and up and those joint return filers earning over $250,000.  Democrats are generally for repeal of tax rate reductions for those aforementioned upper income earners.  Republicans are generally in favor of continuation of all Bush-era tax rate reductions.  Recent defections by certain Senate Democrats suggest that all tax rates cuts may be extended for a one-year period. 

More Articles...

  1. Planning for Estate Taxes

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