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Estate tax rates and exemptions in 2015

Georgia residents are likely aware that the federal estate tax has been a contentious issue in recent years. Supporters of the measure say that estate taxes help to offset income inequality, but opponents claim that these taxes are just a way for the government to take a second taxation bite out of estates. Estate tax rates for 2015 range from just 18 percent to 40 percent, but the associated exemptions mean that any estate tax owed will be calculated at the highest rate.

Estates valued at $1 million or more are taxed at 40 percent, but the lifetime federal estate tax exemption for 2015 is $5.43 million. The exemption was originally set at $5 million in 2010, and it is adjusted every year for inflation. The lifetime exemption is the amount that an individual can pass to their heirs with no taxes being due.

Many individuals look at these exemptions and conclude that estate taxes are not something they need to concern themselves with, but a 40 percent tax rate makes such thinking potentially risky for those who own real estate. Making gifts to heirs is one way to reduce estate tax exposure. There is no limit on giving gifts, and only gifts of more than $14,000 count against the estate tax lifetime exemption.

An attorney with experience in this area could explain why developing an estate plan could be beneficial even for those who will not have to worry about estate taxes. Putting financial affairs in order may prevent conflict among heirs and avoid probate, and documents like a health care directive or living will can make things easier for both medical professionals and loved ones. An attorney could also explain how the use of gifts or certain types of trusts may reduce the amount of tax due on larger estates.

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