Estate tax laws can change every year, and 2016 is no different. In this respect, as we come to the end of 2015, there is something you should keep in mind for the year ahead — regardless of whether you have an existing estate plan or want to create one for the first time.
The federal estate tax exclusion will rise from $5.35 million to $5.45 million, meaning that if the sum total of your estate assets do not exceed $5.45 million, you will not need to worry about federal estate taxes for your heirs. That said, while most individual states have done away with state-level estate taxes, some still have them. Therefore, to be sure that your family will be completely exempt from state and federal estate taxes, you first need to check with your local statutes. After March 31, 2016, for example, the New York state estate tax exemption will be set at $4,187,500. Any amount exceeding this will be subject to between a 3 and 16 percent tax.
If your estate exceeds $5.45 million, then a 40 percent federal tax will apply to any remaining assets. That said, in 2016, it will still be possible for surviving spouses to benefit from unused lifetime exclusion amounts that belonged to their deceased spouses. In other words, if a person is married, then his or her combined lifetime exclusion will be $10.9 million, regardless of when the person’s spouse passes away.
New York and federal estate planning laws can be difficult to understand and navigate. However, with an experienced estate planning lawyer on their side, individuals can plan their estates in a way that reduces their estate tax liabilities for 2016 and beyond.
Source: The Motley Fool, “Estate Planning in 2016: Here’s What You Need to Know,” Dan Caplinger, Dec. 11, 2015
