At the end of 2010 a tax relief act was passed, and provisions within this legislative measure set the estate tax exclusion at $5 million in 2011. The credit or exclusion is the amount that you can transfer to people other than your spouse in a tax-free manner.
Because of the existence of the unlimited marital deduction, you can leave any amount of property to your spouse free of the federal death tax.
An inflation adjustment was applied for 2012 that set the exclusion at $5.12 million. At the end of that year, the American Taxpayer Relief Act of 2012 was enacted. This measure retained the same exclusion with ongoing inflation adjustments.
Throughout 2014 we have been working with a $5.34 million federal estate tax exclusion. Because the year is rapidly coming to a close, the Internal Revenue Service has released the amount of the inflation adjustment for 2015.
During the 2015 calendar year, the federal estate tax exclusion is going to be $5.43 million.
Unified Exclusion
To prevent people from giving lifetime gifts in an effort to avoid the estate tax, there is a federal gift tax. This tax has been unified with the estate tax since 1976. The $5.43 million exclusion that we will see in 2015 is a unified exclusion that covers lifetime gift giving and postmortem asset transfers.
Annual Per Person Gift Tax Exclusion
You can give a certain amount to any number of individuals within a given year free of the gift tax, because there is an annual per person gift tax exclusion. This exclusion exists in addition to the unified lifetime exclusion.
The amount of this exclusion has been raised from time to time to account for inflation. However, according to reports that are circulating, the Internal Revenue Service is not going to raise the annual per person gift tax exclusion for 2015.
At the present time the annual gift tax exclusion is $14,000 per person, and this figure will remain in place next year.
Connecticut Estate Tax
We practice law in the state of Connecticut. While we are looking at death taxes, we should point out the fact that there is a state-level estate tax in Connecticut.
The Connecticut state estate tax exclusion is considerably lower than the federal exclusion. This exclusion is just $2 million, so it is quite possible to be exposed to a death tax on the state level even if you are exempt on the federal level.
Schedule a Free Consultation
You should certainly have a thorough understanding of tax laws when you are planning your estate. If you have questions, we can provide you with answers.
Our firm offers free consultations, and we would be glad to discuss your unique personal situation with you. To set up an appointment, send us a brief message through this link: Hartford CT Estate Planning Attorneys.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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