According to a recent article that is appearing on the Forbes website, the White House has just released its proposed 2015 budget. Some of the provisions are very relevant for those who are exposed to the federal estate tax and the gift tax.
Estate Tax Exclusion
Under currently existing laws, the amount of the estate tax exclusion is $5.34 million. This figure can be adjusted annually to account for inflation. The maximum rate of the estate tax is 40 percent at the present time.
The estate tax is unified with the gift tax. As a result, this $5.34 million exclusion extends to lifetime gifts that you give as well as your estate. In other words, you could give $5.34 million in tax-free gifts while you are living using this unified lifetime exclusion.
The new budget proposal would change all of the above. Back in 2009 the amount of the estate tax exclusion was $3.5 million, and the maximum rate was 45 percent. This budget proposal would roll back the clock and reinstate these parameters. The $3.5 million exclusion and 45 percent top rate would return on January 1, 2018.
There are other relevant changes contained within this proposal. You would no longer be able to use your entire exclusion giving lifetime gifts. The ceiling on the amount of tax-free gifts that you can give throughout your life would go down to just $1 million.
Additional Targets
This budget proposal does not stop with an increase in the estate tax rate and a reduction in the amount of the exclusion. The president’s budget would eliminate dynasty trusts and reduce the effectiveness of a number of other wealth preservation strategies.
Only a Proposal
We would like to emphasize the fact that this is a proposed budget. As we all know, budget negotiations are very contentious, and it is often difficult for legislators to reach a consensus. The president called for similar changes in his 2014 budget.
Stay Alert
When you create your estate plan it is going to be based on the circumstances as they exist at that time. Things change over the years. These changes take place within your life as your financial situation improves, and as we can see from the last two budget proposals, changes can take place that impact society as a whole.
The job is not done after you have put an initial estate plan in place. Should remain alert and prepared to alter your estate plan if and when it becomes necessary.
Your relationship with your estate planning law firm should be looked upon as an ongoing one. It can actually span multiple generations.
If you have any questions about the efficacy of your current plan given the laws that are in place at the present time, contact us to schedule a free consultation.
Blaine Peterson
Author, Attorney
Parman & Easterday
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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