If you have been paying attention to the IRS or the Estate and Gift Tax Exclusion amount (yea, right – who does that?) you’d know that the exclusion amount for 2015 is currently $5.43 million for a single individual and $10.86 for a married couple. This means the first $5.43 (or $10.86) million of your taxable estate passes tax-free. However, every dollar above that amount is taxed at up to 40%. Obviously reducing or avoiding that heavy tax penalty is a concern for people in or around that range of net worth.
For tax year 2016, the IRS has raised those amounts to $5.45 million for an individual and $10.9 million for a married couple. A slight increase, but nothing substantial. Federal law requires the rate be tied to inflation, so yearly increases are expected as long as the economy is growing. Absent a substantial shift in Washington D.C., the exclusion amounts are expected to continue to grow rather than be reduced. If you’ll remember back before the most recent recession, the exclusion amount was $1 million for individuals and $2 million for couples. Tax-based planning was a greater need back then. Now, 99% of people do not need tax-based planning.
If your net worth is at or near the exclusion amount, you need to create a tax-based Estate Plan as soon as possible. Remember, tomorrow is guaranteed to no one.
Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.
Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.