Georgia residents who are deciding their assets will be distributed when they die might be interested in learning that the Internal Revenue Service has announced the estate tax and gift tax exemption for 2017. The 2016 limits were $5.45 million per person in 2016. In 2017, the federal exemption is being raised to $5.49 million with married couples being able to exclude $10.98 million. The gift exclusion remains at $14,000 per year.
Many wealthy couples have to try to pare down the size of their estates below the exemption limits in order to avoid the 40 percent tax rate their estates would otherwise incur. Although spouses may claim a total exemption of $10.98 million, the surviving spouses need to be aware of the portability rules. In order to claim a deceased spouse’s unused exemption amount, the survivor will have to file an estate tax return electing to use it even if no taxes would otherwise be due.
The new limits will let couples who have used all of their exemption amounts have an additional $80,000, which they might use to seed a new trust or establish a GRAT. The annual gift limit of $14,000 doesn’t count towards the lifetime gift tax exemption. This means that people may gift $14,000 each year to their children or grandchildren to help whittle down their estates.
People who have substantial assets might want to discuss strategies to bring their estates under the federal exemption for estate taxes. An estate planning attorney may provide guidance to a client about different vehicles that might be used in this regard.