What you might want to do if with your estate plan now that 2015 is coming to an end and 2016 has begun is what we will be talking about in today’s blog. We wanted to focus a little more on the issues and changes that you might need to consider now that 2016 has begun. Every year can bring significant changes to estate planning laws, not to mention personal changes, and anyone with an estate plan needs to be prepared to amend his or her planning tools in light of such changes.
Estate Planning in 2016. Estate Tax Exemption Increase
The federal estate tax is one of the most commonly talked about estate planning concerns, even though it only affects a small number of people. Estate taxes are applied to the value of an estate left behind by a deceased person. Any estate with a value over the individual exemption amount has to pay tax on the value of property over that exemption amount. The amount each individual can exempt changes every year as the result of inflation increases, and can also change with changes in tax laws.
In 2016 there are no tax law changes that affect the individual exemption amount, but there is an inflation increase. In 2015 the individual exemption amount was $5.43 million, but that amount increased to $5.45 on January 1st, 2016.
Estate Planning in 2016. Gift Planning
Estate plans that focus on estate tax mitigation often include a gift plan as a key element. Through yearly individual gifts, you can reduce the size of your taxable estate by a considerable amount, and do so on a regular basis. Further, a gift plan allows you to give individual gifts to as many people as you wish, and as long as you don’t exceed the maximum yearly amount you will not be penalized.
Unlike the yearly individual estate tax exemption amount, the 2016 gifting limit will not be higher. As in 2015, each person can give up to $14,000 in individual gifts, while married couples can combine their individual gifting abilities and give up to $28,000 per person.
Estate Planning in 2016. Yearly Reviews
Even if nothing in your life has changed in the past year, you’ll still want to take a look at your estate plan in 2016. This is doubly true for anyone who has a plan in place but who has not reviewed it in several years. You’ll also want to talk to us about any issues you might need to be aware of, or ask our advice about what changes you should make if your personal circumstances have gone through any changes.