The IRS has updated the limits for the unified estate and gift tax exemption amounts. These updates increase the limits for federal estate and generation-skipping tax and several other provisions affecting the transfer of wealth. The gift tax limit remains unchanged for 2017.
- Tax Exemption Amount. The federal estate tax exemption amount for 2017 is $5.49 million per person. This means that every person dying in 2017 can transfer up to $5.49 million ($10.98 million for a married couple) at death without paying estate tax. These amounts are adjusted for any lifetime gifts exceeding the annual gifting limit; if an individual makes gifts to the full limit during lifetime, there will be no exemption available for their estate at death.
- Tax Rate. The maximum tax rate imposed on an estate in excess of the $5.49 million exemption is 40%. This tax rate is a unified rate applied to both gift taxes during life and estate taxes imposed at death.
- Cost Basis of Estate Assets. All estate assets are entitled to adopt the fair market value of the asset as of the decedent's date of death. Therefore, estate beneficiaries will use the asset's estate value as their cost basis for the determination of capital gains, or losses, upon the eventual disposition of the asset.
- Portability of Tax Exemption Amount. A surviving spouse may elect to add any unused amount of their previously deceased spouse’s $5.49 million exemption to their estate tax exemption limit. This portability of the exemption amount between spouses allows a family to pass $10.98 million of assets to their beneficiaries, upon the filing of an estate tax return preserving the unused exemption amount of the deceased spouse.
- Generation Skipping Tax. The Generation Skipping Tax is unified with the federal estate tax exemption amount of $5.49 million. This allows a grandparent to make gifts to their grandchildren to the $5.49 million limit without the generation skipping tax being imposed.
- Gift Tax.The annual gift tax non-reporting limit remains at $14,000 per person / per calendar year.; $28,000 per person / per married couple. However, gifts for medical, dental and tuition expenses for any individual are unlimited and do not count toward the annual $14,000 limit as long as they are paid directly to the provider.
- Ohio Estate Tax.There is no estate tax imposed on the value of any Ohio resident's estates. The Ohio legislature repealed the Ohio Estate Tax effective as of January 1, 2013.
These changes present an opportunity to review your estate plan and ensure that your plan takes full advantage of these new tax law provisions. Please contact us to address any particular questions or concerns regarding these and any aspects of this extensive tax law. The attorneys of Palecek, McIlvaine, Hoffmann & Morse Co., L.P.A. are here to assist you with all of your legal needs.