Current tax laws allow individuals to leave almost $5.5 million to their heirs without paying federal estate or gift taxes. Married couples can protect almost $11 million from federal inheritance taxes.
Here are more specific numbers:
Changes to Lifetime Tax Exemptions
Due to inflation, the federal estate and gift tax exemption (the “Unified Credit”) has been revised for 2017 by the IRS. The Unified Credit has been raised from $5.45 million in 2016 to $5.49 million per individual in 2017. The net increase (year over year) of $40,000.00 allows a person who has previously extinguished their Unified Credit to be able to take an additional Unified Credit exemption equal to $40,000.00 ($80,000.00 for a couple).
How to Use Gifts to Maximize Tax Savings
A couple is allowed to give away up to $28,000.00 tax-free to individuals ($14,000.00 per person). For a family with four children, that can add up to over $100,000.00 in annual tax-free gifts. Gifts create wonderful tax savings since the value of such gifts are not included in the recipient’s income tax but gifts nevertheless reduce the taxable estate of the donor. Furthermore, gifts that are made under the annual exclusion amount do not count towards an individual’s Unified Credit.
We recommend taking a look at how you and your heirs may be able to benefit from a tax-free gifting program, especially before the close of the current tax year.