In the spirit of year-end planning, there will be a change in the gift tax exemption for 2015. Have you heard the news?
A single person can currently give $5.34 million total to other people tax-free. After that, any gifts are taxed.
Forbes, in a recent article titled "IRS Raises Limit on Tax-Free Lifetime Gifts for 2015," reports that this limit will increase to $5.43 million in 2015.
Gifting is an important part of estate planning for wealthy people. It provides a way to give money to family members before you pass away and lower the total value of an estate to minimize the impact of the estate tax.
This gift tax change will allow people who have already reached the exemption limit to give a little more, perhaps to a relative who was not yet born when the lifetime limit was previously reached.
The extra $90,000 could also be used to give to other relatives who might be in need. While it might not seem like very much, $90,000 could do a lot of good for one individual.
Because of this exemption increase, now would be a good time to consult an experienced estate planning attorney to revisit your gifting plan.
At the same time you could talk to the attorney to determine whether any other portion of your estate plan needs to be revised to account for other laws that might have changed.
Note that the Federal Gift exclusion amount will remain at $14,000. Each year, taxpayers may gift up to $14,000 without incurring the responsibility of submitting an informational gift tax return. We frequently remind our clients that a taxpayer can gift up to $5.43 million (in 2015) to anyone without paying a dime of gift tax. Why does the $14,000 figure matter? It’s a good idea to mention any gifts over $14,000 to your attorney and CPA such that you are reporting gifts over the exclusion amount.
Reference: Forbes (October 30, 2014) "IRS Raises Limit on Tax-Free Lifetime Gifts for 2015"