When updating or creating an estate plan this year, taxes may be a concern for some Nevada residents. Understanding the tax ramifications of estate planning is essential to ensuring that heirs and beneficiaries receive the most benefit from an individual’s estate. The federal estate tax exemption and the gift tax exclusion may affect how people structure their estate plans.
This year, the federal estate tax exemption was raised to $5.43 million. For a married couple, each spouse is entitled to the exemption. If one spouse dies without using all of his or her exemption, the surviving spouse has the right to add the residual amount to his or her exemption.
During life, an individual can give away up to $5.43 million as gifts without the estate owing any tax. If each gift does not exceed $14,000, it will not count toward that total, and no tax will be due on it. Taxes are only due once the total amount of the gifts exceeds the federal exemption, and most people do not reach that limit.
Each gift reduces the amount of an individual’s taxable estate, and any tax due is based on the recipient’s tax rate, which is often lower than the person making the gift. Plus, the person receiving the gift will immediately enjoy some of his or her inheritance. For individuals who are wealthy, this strategy could be a win-win situation.
Even though tax considerations are just one part of estate planning, for those with sizable estates, it is an important one. Most Nevada residents desire to provide for their families as much as possible after their death. Conferring with someone familiar with how taxes will affect an estate could increase the likelihood of that becoming a reality.
Source: marketwatch.com, “3 important things to know about estate planning“, Bill Bischoff, Feb. 11, 2015