Early Predictions About 2016 Estate Tax, Gift Tax, GST Tax and Annual Gift Tax Limits

Under current law the federal estate tax, gift tax, and generation-skipping transfer tax exemptions have become unified and are indexed for inflation on an annual basis.  Since 2011, the exemption and tax rate has changed as follows:

            Year    Exemption       Tax Rate

            2011    $5,000,000      35%

            2012    $5,120,000      35%

            2013    $5,250,000      40%

            2014    $5,340,000      40%

            2015    $5,430,000      40%

The annual exclusion from gift taxes is also indexed for inflation on an annual basis but only in $1,000 increments.  Since 2011, the annual gift tax exclusion has changed as follows:

            Year    Exclusion       

            2011    $13,000          

            2012    $13,000          

            2013    $14,000          

            2014    $14,000         

            2015    $14,000          

While the IRS will not officially release the 2016 inflation-indexed exemption and exclusion until later in October, Wolters Kluwer Tax & Accounting has released its 2016 predictions based on historical inflationary trends.  According to Wolters, the exemption should end up at $5,450,000 in 2016, or $10,900,000 for married couples.  While this is a mere $20,000 per individual / $40,000 per married couple increase over the 2015 exemption, it is a whopping $450,000 per individual / $900,000 per married couple increase since 2011. Unfortunately, Wolters anticipates that the annual gift exclusion will remain at $14,000 for 2016.

Wealthy individuals and couples should continue to monitor these inflation-indexed numbers and plan accordingly. We will update you on the official 2016 numbers once the IRS releases them.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.