The IRS has issued the estate and gift tax limits for 2015 (Rev. Proc. 2014-61). For an estate of a person dying in 2015, the basic exclusion amount is $5,430,000 for determining the credit against federal estate tax. This means that for a person dying in 2015, no federal estate tax will be imposed if his or her gross estate is less than $5,430,000. Therefore, with proper estate planning, an individual could transfer up to $5,430,000, or a married couple could transfer up to $10,860,000, to their children without paying federal estate tax. The basic exclusion amount for 2015 was adjusted for inflation up from the 2014 amount of $5,340,000.
In 2015, the first $14,000 of gifts of a present interest made to any person is not included in the total amount of taxable gifts. For example, a person can gift up to $14,000 of a present interest from January to December 2015 without reporting the gift to the IRS, without using any lifetime gift tax exemption, and without paying gift tax. However, if you are a married couple wanting to make a similar gift, slightly different rules apply. Gifts to a spouse who is a United States citizen are not restricted by this $14,000 limitation.
Other gifts not restricted by the $14,000 limitation include qualified gifts paid directly to institutions for educational or medical purposes. A qualified gift would include direct payment to a college or university for another person’s tuition or direct payment to a hospital for another person’s medical bills. The annual exclusion amount for gifts is periodically adjusted for inflation but adjustments do not happen every year. For example, the $14,000 exclusion amount for gifts for 2015 is the same as it was in 2014.
For help understanding these estate and gift tax limits, or for reviewing your will or trust under these new tax limits, contact Marlaine C. Teahan, chair of Fraser Trebilcock’s Trusts and Estates Department. Marlaine can be reached at 517-377-0869 or firstname.lastname@example.org.