Thursday, February 26, 2015

2015 Federal Estate and Gift Tax Exemptions

2015 arrived with a gift from the Internal Revenue Service to both individuals and professional advisers.  Estate and gift tax exemptions increased or stayed the same.  

Estate Tax:  The estate of each individual who dies in 2015 may transfer up to $5,430,000 without paying estate tax ($90,000 more than the 2014 amount of $5,340,000).  Generation Skipping Tax exemption also increased to $5,430,000.

Portability:  A married couple may combine the individual exemptions to transfer $10,860,000 through a technique called "portability" with the filing of an estate tax return by the surviving spouse or estate executor.  A box is checked on the return and that simple act reserves the right to transport the exemption and add it with the exemption of the second spouse to die.  This is a much simpler process than the establishment of multiple trusts and segregation of assets which was necessary prior to portability.   

Gift Tax Exemption:  This remains the same as in 2014: $14,000 per year per person without impacting the lifetime estate tax exemption (currently set at $5,430,000 as described above).  A married couple may transfer twice the exemption amount, $28,000, to a single recipient.   There is no limit to the number of recipients.  Neither the recipient or the giver pays a tax.  Annual gifts are a method to reduce total estate value and can be very effective if undertaken systematically over many years.

At the current exemption amounts only an estimated 3,700 estates, 0.12% of the total number of decedent estates, will owe estate tax. Estate tax, also known as the "death tax", has become a non-issue for most residents and citizens of the United States.  After years of uncertainty in Federal estate and gift tax and last hour Congressional votes and Presidential signings, the stability over the last 3 years is refreshing.  There are so many other issues pending before Congress, it is unlikely estate and gift tax will be added to the mix, at least until a new President takes office in January, 2017.

If you have questions about how any of these taxes and exemptions apply to your estate, please call attorney Kathleen Wright at 408.499.2159 or email