Craig's Corner - Wealth Planning Insights

Monday, September 29, 2014

Inflation Adjustments Offer Estate Tax Savings

Inflation may increase one's cost of living but, thanks to the indexing of estate and gift taxes to inflation, it could decrease the cost of dying.  Wolters Kluwer, CCH has examined recent Department of Labor inflation numbers and projected how they will affect estate and gift tax exemptions in 2015.

• Federal Estate Tax Exemption.  This exemption, currently $5.34 million, will rise to $5.43 million in 2015.  Individuals in the top estate bracket (40%) could leave an additional $90,000 to beneficiaries free of federal estate tax.

• Lifetime Gifts.  Because the gift tax is linked to the estate tax, the amount of lifetime giving rises by the same amount.  Lifetime gifts reduce the estate tax exemption by a corresponding amount, but there are many reasons for considering them.  A parent who gave a $5 million trust fund to a child could soon increase it to $5.43 million.  A couple could make it $10.86 million.

• Annual Gift Tax Exclusion.  This tax is completely separate from the lifetime gift exemption.  Gifts within the annual exclusion aren't counted toward the total lifetime gift exemption and can be given to multiple recipients for a total much larger than $14,000.  The gift exclusion of $14,000 is not expected to rise in 2015, though it is already higher than it was in 2013.  Some gifts, for medical, dental, and tuition expenses, if paid directly to the provider, may not necessarily be counted toward these limits.

• "Kiddie Tax."  This tax is imposed on investment income of children up to the age of 23.  It requires that children be placed in their parents' tax bracket, even though their income might not otherwise put them there.  Currently, the first $1000 a child earns is exempt from the kiddie tax, the next $1000 is taxed at 15%, and then the parents' tax rate applies.  In 2015 it is projected that the initial $1000 may rise to $1050.

The IRS will release official numbers later this fall.  For now, these projections are a useful reminder of the many strategies that may be available to shield assets from estate and gift taxes.  A qualified estate planning attorney can help you determine how to make the most of the new limits.  Nevada trusts and estates attorney Craig Stone has expertise in all aspects of the field and can advise you on the best tax planning options for your situation.  Call (877) 905-0890 for a consultation today.

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S. Craig Stone II of Stone Law Offices, Ltd. serves clients throughout Clark County, Southern NV, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County. Also serving clients with asset protection nationwide.

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