The parameters of the federal estate tax were in flux for a number of years, but there has been some stability since 2011. This started with the enactment of The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
You can transfer unlimited assets to your spouse tax-free as long as your spouse is an American citizen, but transfers to others are potentially taxable. The estate tax exclusion is the amount that can be transferred to anyone other than your spouse before the tax would be applied. Provisions contained within this act set the estate tax exclusion at $5 million for 2011, and an inflation adjustment for 2012 was included. After the adjustment was applied, the exclusion was $5.12 million in 2012.
This tax relief act that was passed at the end of 2010 was only in place for two years. At the end of 2012, the exclusion was scheduled to revert back to just $1 million, and this would have exposed many more people to the federal estate tax. In the eleventh hour, a new piece of tax legislation was passed that is called the American Taxpayer Relief Act of 2012.
A portion of this act made the $5 million inflation adjusted exclusion permanent. An adjustment made the exclusion $5.25 million in 2013, and in 2014, the adjusted exclusion was $5.34 million. Throughout the 2015 calendar year, the exclusion has been $5.43 million.
To this point, the exclusion adjustments have been at least $90,000. Since the year is coming to an end, the Internal Revenue Service has announced the inflation-adjusted exclusion for 2016. It is going up by just $20,000 to $5.45 million.
Estate Tax Efficiency
As a resident of New York, you have a state-level estate tax to concern yourself with as well. For the time being, the exclusion is lower than the federal exclusion at $3.125 million.
If you are exposed to either or both of these death taxes, there are estate tax efficiency strategies that can be implemented to ease the burden. The best strategy will depend upon the circumstances.
There are various different types of irrevocable trusts that can provide estate tax efficiency, and there are other steps that you can take to transfer assets at a tax discount.
Since each case is different, personalized attention is the key to a properly constructed wealth preservation plan. If you would like to discuss your unique personal situation with a licensed professional, our firm can help. We offer no obligation case evaluations, and we can get to know you, gain an understanding of your position, and make the appropriate recommendations.
If you decide to go forward, we can help you craft a plan that keeps a maximum store of resources in your family. To set up an appointment, send us a message through this page: Smithtown NY Estate Planning Attorneys.