Estate and Gift Tax Updates for 2017

The American Taxpayer Relief Act of 2012 is still going strong, and there are some changes to the tax code in store for this New Year.  For those who are not familiar with the law, this act made the following permanent: the reunification of the estate and gift tax regimes, the $5 million estate along with the generation skipping transfer tax exemptions, and the portability of the federal estate tax exemption between spouses at death.

The great aspect of The American Taxpayer Relief Act of 2012 is that the gift tax exemptions adjust for inflation each year.  In 2017, the federal estate tax exemption will be increased to $5,490,000.  The exemption was $5,450,000 in 2016.   Further, the generation skipping transfer tax exemption has also been increased to $5,490,000.

The more commonly used exemptions are the lifetime gift tax exemption.  The lifetime exemption is the amount a person can give throughout his or her life without paying any federal gift taxes.  In 2017, the rate will now be $5,490,000, which was also increased from $5,450,000 in 2016.  Further, a married couple may combine their lifetime exemptions so the combined estate can give up to $10,980,00.

Unfortunately, the annual gift tax exemption did not change this year and is still $14,000.  This means that a person can give up to $14,000 a year tax-free, and this gift will not eat away at a person’s lifetime exemption.  Life the lifetime exemption, spouses may also combine their annual inclusions.  A married couple may give up to $28,000 a year tax-free without eating into either spouse’s lifetime exemption.  There are other ways to contribute an unlimited amount for healthcare and education, but the payments must be made directly to the provider.  For more information on this, you should check with your CPA.

These increased exemptions create opportunities to make larger lifetime gifts, which further allows our clients to leverage more assets through a variety of estate planning techniques through estate planning.  One estate planning technique the Jacksonville estate planning attorneys at our law firm utilize is to shift income-producing assets to individuals such as children in lower income brackets to lower the taxable estate.

The New Year is also bringing some additional updates that affect the estate planning world.  For instance, if a person owns a traditional IRA then he or she must begin to receive the required minimum distributions from the IRA by April 1st of the year the person turns 70 ½.  A person must receive the required minimum distributions by December 31st of each year.  Further, if you are a current beneficiary of an inherited IRA, then you may have to take the required minimum by December 31st of each year regardless of the beneficiary’s age.  Talk with your CPA for more information on these distributions.

To create a plan to take advantage of asset protection or  estate planning techniques contact the Jacksonville estate planning lawyers at The Law Office of David M. Goldman PLLC.

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