One big hurdle faced by Florida residents who are preparing estate plans may soon be lowered thanks to action by the federal government. According to financial reports, the government may be looking at inflation rates as they relate to the estate tax, which could mean lower taxes for heirs.
The threshold that is up for an increase is the federal income tax exemption. That exemption is expected to increase to $5.43 million in 2015, which is up nearly by $90,000 from the current 2014 levels. The annual gift tax exemption, however, will remain at $14,000, which means gifts of up to that amount may be given at will throughout the year with no taxes paid.
Many times, individuals use gift tax and estate tax exemptions to help limit the devaluation of an estate after an individual holding the wealth passes away. For example, using the threshold set up by the federal estate tax exemption as a guide, a benefactor might attempt to use the gift tax exemption to limit the size of his or her estate. This strategy may involve giving annual gifts to a number of individuals every year in an effort to reduce the size of the benefactor’s estate to the level set by the estate tax exemption.
Rules and regulations regarding taxes, exemptions, and gifting of money continuously change, and it can be difficult for a person without legal experience to keep up with all of the intricacies of tax law. However, an estate tax planning attorney may be able to help a client create a plan that provides protection from unnecessary taxation and transfers the wealth according to the benefactor’s wishes.