One of the most important parts of estate planning is understanding how much of the estate will be subject to taxes. This is determined by a variety of factors, such as how the estate plan is structured. The Internal Revenue Service sets specific monetary limits that must be understood and adhered to for estate planning to be successful.
2015 limits were announced towards the end of October by the IRS. The announcement affirmed that they are leaving the annual gift exclusion at $14,000 per recipient. The federal estate tax exemption, however, was raised. It is now set at $5.43 million per person. That is an increase of $90,000 over 2014, in which that exemption was $5.34 million.
Because the annual gift exclusion is separate from the lifetime gift exemption, monetary gifts given under the former aren't deducted from the latter. Additionally, gifts given when taking the annual gift exclusion can be given by both members of a couple, each claiming the exemption for each person they give gifts to. For example, a husband and a wife could each give $14,000 to each of 4 grandchildren, with the full $112,000 of that set of gifts still coming in under the annual exemption.
This can be an important way to decrease the amount of an estate that will remain to be taxed before going to heirs. Of course, the increase in the federal tax exemption may render that approach less necessary for some, depending on their circumstances. An experienced attorney can advise about the best specific approach in your case.
Source: Forbes, "IRS Announces 2015 Estate And Gift Tax Limits" Ashlea Ebeling, Oct. 30, 2014