A new year is an excellent time for Colorado residents to take stock of their estate plans. Changes in federal tax laws can be evaluated to determine the potential impact on one's heirs. Additionally, this is an important time to make adjustments related to major life events that have occurred recently. In 2014, the federal government received nearly $13 billion in estate taxes, making closer scrutiny of one's plans a priority.
Because estate taxes only affect amounts exceeding a certain level, it is important to adjust for the new year's changes in those exempted amounts. The 2015 amount increases by $90,000 in comparison with that of 2014, with a total exemption of $5.43 million per person. The annual gift tax exclusion, however, has not changed for 2015. The annual limit is $14,000 in cash or property for any one individual. Normally, the amount is adjusted for inflation, but there wasn't a high enough rate of inflation in 2014 to warrant an increase.
Marital deductions allow for non-taxable gifts and bequests, meaning that an individual can give as much as desired to a spouse without incurring tax liabilities. Additionally, charitable contributions are exempt from taxes in an estate. However, such funds must be given directly to the organization in question for these exemptions to apply. Married couples can also benefit in that a deceased spouse's tax exemptions can later be used by a surviving spouse, potentially doubling the tax exclusion. This benefit, known as portability, was made permanent in 2013. However, many individuals have not adjusted their estate plans to reflect these changes.
The complexity of tax laws related to estates can make it difficult to make the most of exemptions. The assistance of a knowledgeable estate planning attorney can be crucial for addressing changes and updating a plan to limit tax liabilities.
Source: The Motley Fool, "Estate Tax in 2015: 4 Rules You Should Know", Dan Caplinger, December 28, 2014