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Benefiting from the estate tax rules in 2015

The U.S. government collected around $12.7 billion from estate tax filings in 2013, but New York residents may be able to minimize the amount they pay because the rules concerning estate tax change every year. First, the federal estate tax exclusion amount rises to $5.43 million in 2015, so only those whose estates exceed this amount are subject to this federal tax.

The annual gift tax exclusion allows one to give $14,000 in nontaxable property or cash, but it is important to remember that gifts are unified with the estate tax system. This means an estate tax exemption will be less if one has made gifts over the annual limit. Estate and gift taxes do not apply to all gifts, and marital deductions and charitable donations are exempt. Gifts for another person's medical or educational expenses are also exempt when paying the institution providing the services directly.

There is an exemption for estate and gift taxes when property is left or given to a spouse, which allows married couples to benefit from this exemption when factoring portability into tax planning. One partner can use a deceased spouse's benefits later in life, and this could save couples $2 million and double the estate tax exclusion.

Establishing an estate plan is important so that one can have a say in what happens to his or her assets, and this also usually gives one the opportunity to minimize taxes and give more to loved ones. Those that already have an estate plan may need to update will and other documents when financial or other circumstances change. An estate planning attorney can be of assistance in both the preparation of these documents as well as in their regular review.

Source: The Motley Fool, "Estate Tax in 2015: 4 Rules You Should Know", Dan Caplinger, December 28, 2014

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