For every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!
The exemption from estate taxes is an amount excluded or subtracted from an estate’s gross value for purposes of calculating the tax owed at the federal level upon an individual’s death. There is no tax imposed on assets transferred up to the exemption limit (currently 5.49 million dollars). Lifetime gifts can also count towards that limit if they are above a certain nominal threshold (this is called the gift tax exclusion). Any amount gifted during an individual’s lifetime is subtracted from the estate tax exclusion total and any excess over the estate tax exclusion is subject to taxation. Each year, the estate and gift tax exemptions are re-evaluated and the government decides whether the exemption will stay the same, be decreased, be increased or repealed completely.
1. Definition of Estate Planning
Estate Planning is the process of planning for the disposition of an individual’s assets after death. Estate Planning typically includes incapacity planning documents (durable power for health care, durable power of attorney for finances as well as a HIPAA Release), a last will and testament and a revocable trust (in most cases). Asset Protection should always be coordinated with Estate Planning to ensure that an individual’s planning objectives are optimized. Business Succession Planning should also be coordinated with Asset Protection and Estate Planning to ensure integrated planning.
2. Current Estate and Gift Tax Exemptions for 2017
The estate tax exemption for the 2017 is $5.49 million dollars per individual (double for married individuals). The gift tax exemption for 2017 is $14,000.00 per individual (double for married individuals). That means an individual can die with $5.49 million dollars of assets and not be subject to any federal estate tax. An individual may also gift $14,000.00 of assets to anyone without the requirement to report the gift to the Internal Revenue Service on a gift tax return.
3. New Estate and Gift Tax Exemptions for 2018
The Internal Revenue Service (IRS) has finally announced the new estate and gift tax exemptions for 2018. The IRS decided that both exemptions should be increased. The estate tax exemption for the 2018 will be $5.6 million dollars per individual (double for married individuals). The gift tax exclusion for 2018 will be $15,000.00 per individual (double for married individuals). In other words, in 2018, an individual can gift up $15,000.00 without filing a gift tax return. The total amount of gifting that exceeds $15,000.00 are added up and subtracted from the estate tax exemption at death ($5.6 million dollars currently).
4. Reasons why understanding the Estate and Gift Tax Exemptions is important
It is important to understand the estate and gift tax exemptions in order to optimize estate planning goals. Obviously, no one wants to pass away and pay the government a 40% tax on the gifting of their assets to their loved ones. If an individual is near the exemption amount, there are certain advanced estate planning techniques, such as the Irrevocable Life Insurance Trust, that can utilized to reduce the amount of exposure the individual has to federal taxes. The most important part of this type of planning is to act proactively! This requires having the requisite knowledge of the estate and gift tax as well as knowing whether the exemption is increased, decreased or repealed each year.
The Presser Law Firm P.A., Asset Protection Attorneys, represents individuals and businesses in connection with the establishment of comprehensive Asset Protection plans that incorporate both domestic and international components.
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“For every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!” states attorney Hillel L. Presser, Esq., MBA regarding the importance of protecting your assets proactively.
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