Long Island Elder Law & Estate Planning

Every year the president puts together a proposed budget for the following year that is called “The Green Book.” The proposal for 2015 has been released, and this is newsworthy to the estate planning community.

Rate Hike In 2018?

The proposal targets a number of different areas of the tax code that are relevant to the field of estate planning. For one thing, the proposal would increase the maximum rate of the estate tax. The increase would take effect on the first day of January in 2018.

The estate tax rate currently maxes out at 40 percent. This proposal would increase the top rate of the federal estate tax to 45 percent.

Exclusion Would Be Reduced

There is a line in the sand that is drawn separating people who must pay the estate tax from those who are exempt. It exists in the form of the federal estate tax exclusion or credit. If your assets do not exceed this amount, your estate would not be subject to the federal death tax.

At the current time the amount of the federal estate tax exclusion is $5.34 million. Due to provisions contained within the American Taxpayer Relief Act of 2012, inflation adjustments could be added annually. As a result, you could see an adjustment added at the beginning of next year.

The 2015 budget proposal would reduce the amount of the federal estate tax exclusion. If this proposal was to become law, at the beginning of 2018 the amount of the federal estate tax exclusion would be $3.5 million.

We have a federal gift tax in the United States along with the estate tax. This tax is in place to close the loophole that would exist if people could give unlimited gifts throughout their lives in an effort to avoid the estate tax.

As the laws currently stand, the $5.34 million exclusion that we mentioned previously is a unified exclusion that applies to lifetime gifts that you give coupled with the value of your estate. You could use the entirety of your transfer tax exclusion giving gifts while you are living if this is your choice.

The proposed budget would change this arrangement. You would only be able to give $1 million tax-free while you are living if this proposed budget was to be adopted.

Tax Efficiency Strategies Targeted

In addition to these changes to the transfer tax parameters, the proposed 2015 budget targets some legal strategies that are widely utilized to provide estate tax efficiency, including the utilization of the zeroed out grantor retained annuity trust.

Pay Attention

Remember, these changes are contained within a proposed budget. They may never be implemented. However, you should pay attention and discuss the implications with your estate planning attorney if any of these changes do in fact become law.

 

 

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About Eghrari Wealth Training Law Firm

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghrari’s primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill.