Georgia residents may be aware that exemption to the federal estate and gift tax was established at $5 million in 2011 and has increased each year since according to the annual rate of inflation. The IRS announced the latest increase in October 2015 to $5.45 million for individuals and $10.9 million for married couples, effective for 2016. The figures for 2015 were $5.43 million and $10.86 million respectively. The gift exclusion per year remained unchanged at $14,000.
The estate tax exemption fluctuated before being set at $5 million in 2011. It was a mere $675,000 in 2001 before rising to $1 million in 2003 and $2 million in 2008. The tax has also been a hot topic among candidates running for president in 2016. Many Republican candidates have vowed to abolish the estate tax altogether, but Democratic hopeful Bernie Sanders believes that the exemptions should be lowered to $3.5 million.
The IRS allows unlimited numbers of annual gifts to be made of up to $14,000. These gifts will not be counted toward the lifetime gift exemption. Married couples can each make as many $14,000 gifts as they choose, but gifts made to children in excess of $1,050 will be taxed. Gifts that are used to pay for medical, dental or educational expenses do not count toward any IRS gift limits.
While these exemptions may seem high, there are reasons why Georgia residents should not dismiss estate tax considerations entirely when making estate planning decisions. Attorneys with experience in this area could point out that rising real estate values could lead to estate tax bills for families who do not consider themselves to be wealthy. Attorneys may also point out that careful planning may be prudent in times of political uncertainty and mounting financial pressure in the nation’s capital.