People in New York who are planning their estates for the first time should become familiar with the most current federal and state laws that could be applicable. Staying up-to-date is also important for people who are updating existing estate plans. For 2016, there are several areas of tax law that are remaining the same and a few that are changing.
One of the changes that will have an impact on estate planning in 2016 is an increase to the federal lifetime gift and estate tax exclusion amount. The exclusion amount will rise by $20,000 to $5.45 million. Over the past 10 years, the amount that individual estates could leave to heirs without incurring any federal estate taxes has increased significantly. In 2005, the lifetime gift and estate tax exclusion amount was just $1.5 million.
The annual gift tax exclusion amount will remain at $14,000 for 2016. As long as individuals do not give more than $14,000 in gifts each year while they are alive, the gifts will not be included in their lifetime gift and estate tax exclusion amount. If a person’s estate is eligible to be taxed by the federal government, the tax rate is still going to be 40 percent in 2016. Couples can still use portability to transfer the unused portion of one spouse’s estate tax exclusion amount to the other spouse for a maximum exemption of $10.9 million in 2016.
It can be difficult for most people to understand how changes to estate planning laws affect them. An estate planning attorney may be able to help an individual or couple to plan their estate in the most tax-efficient manner.