2015 Estate and Gift Tax Update

The 2015 estate and gift tax limits, as well as retirement plan contribution limits have been released by the IRS. For estate taxes, the top tax rate remains unchanged at 40%. However the federal estate and gift tax exemption amount has increased to $5,430,000 per person. This is an increase of $90,000 based on the annual increases for inflation. Thus, for a married couple, a proper estate plan can protect a total estate of $10,860,000 in 2015.

With estate tax limits so high, many clients no longer need to be concerned about estate taxes and can opt for trusts and estate plans that are no longer as complex. Many want to now revise their plans for simplification purposes and are pleased that estate taxes are no longer such a large concern.

Annual gift tax exclusion amounts remain at $14,000 per person. A donor can gift $14,000 to any number of donees with no tax consequence. Gifts in excess of $14,000 in 2015 would have to be reported on a gift tax return (form 709). In addition, a 529 college savings plan can be funded, and up to five (5) years worth of annual gifts may be made at one time ($70,000) without reducing the lifetime gift tax exemption, although a gift tax return would have to be filed to report the gift. To avoid reporting requirements, gifts can be paid directly to providers for medical, dental or tuition and do not count towards the annual limits.

For 2015 the IRS has increased the annual contribution limits for retirement plans. The annual limit for 401(k), 402(b) and 457 plans is $18,000, an increase of $500. For employees that are over age 50, a catch-up contribution amount has also increased by $500 to a maximum of $6,000 per year. This catch-up contribution can be made in the year you turn 50, no matter your birthdate. For IRA contributions, the annual limit remains at $5,500, and the catch-up contribution limit remains at $1,000.

* The information contained in this Blog is intended for general information and educational purposes only and does not constitute legal advice or an opinion of counsel.