As many estate planners anticipated, The Internal Revenue Service has raised the limit on tax-free transfers during life or at death. Beginning in 2015 that amount, known as the basic exclusion, will increase to $5.43 million per person, up from $5.34 million this year. This announcement, in Revenue Procedure 2014-61, indicates there will be no change in the annual exclusion, allowing you to give $14,000 in cash or other assets each year to as many individuals as you want without using the basic exclusion. The annual exclusion gifts don’t count towards the lifetime gift exemption. Another tactic is to fund a 529 college savings plan for your children or grandchildren. There’s a special rule, a 5-year election, that lets you put five years of annual exclusion gifts in a plan at once.
The lifetime gift tax exclusion (also called the lifetime exemption), and the estate tax exclusion are expressed as a total amount and it is possible to use this basic exclusion to transfer assets at either stage or a combination of the two. If you exceed the limit, the top federal estate tax rate is 40%.
For people who had previously used this basic exclusion have the option to top off with an additional $90,000 available for tax-free gifts next year. Another way to use this extra exclusion amount is to benefit a descendant who was born after your initial planning, and is therefore not a beneficiary of earlier gifts.
These rules now apply to same-sex married couples, no matter what state they live in.
If you have specific questions regarding your Estate Plan, please contact our Estate Planning Attorney in Los Angeles.