Estate Tax Exemption for 2016

Good News!

Recently, the Internal Revenue Service (IRS) announced the new limits for estate and gift taxation. These are the amounts that you can give tax free during life or at death in your will or living trust. Unfortunately, the annual gift exclusion stays at $14,000 – the amount that you can give (per person, per year) without having to file a Form 709 gift tax return. This means a married couple could give their three children a total of $84,000 and not have to file a gift tax return (two parents x three children x $14,000 = $84,000).

The death tax has gone down, just a bit. In 2015 you can leave $5,430,000 tax free – that amount increases to $5,450,000 in 2016. This means that you and your spouse can leave $10,900,000 tax free (but you have to file an estate tax return Form 706 on the death of the first spouse to die). If you are married and have a taxable estate less than $10,900,000 – no Federal Estate Tax. You can also give, as a married couple, $10,900,000 and not pay gift tax. Remember that a taxable estate includes your equity in real estate, your personal property, your bank accounts, your IRA/401K/TSA, and the death benefit on your life insurance policy.