VanNess & VanNess, P.A.

IRS announces new estate tax exemption for 2016

When it comes to estate planning, two of the more important points that we strive to get across to our readers on a regular basis are that having the necessary documents in place can help ensure that 1) your exact wishes are honored upon your demise and 2) your family members will be far less likely to engage in divisive probate litigation.

Another point that we try to emphasis to our readers with some regularity is that estate planning can also help you minimize estate taxes, such that you can preserve more of the assets you've worked so hard to accumulate over the course of a lifetime.

While a person might be tempted to dismiss tax considerations as a rationale for estate planning given that the federal estate tax exception is in the millions -- currently $5.43 million -- and they don't believe that they would have anywhere near that amount, this is often not to the case.

Indeed, the cumulative value of a lifetime of assets -- from retirement accounts and real estate to business interests and personal collections -- can rapidly push a person's estate over the estate tax threshold.

In light of this reality, everyone needs to pay very careful attention to announcements relating to the estate tax limit.

In fact, just a couple weeks ago, the Internal Revenue Service announced that the estate tax exemption for 2016 will be $5.45 million per individual. While this might not seem like that sizeable of an increase, consider that it was only in 2011 that the estate exemption was set at $5 million, indexed for inflation. Prior to that, the exception was $2 million in 2008, $1 million in 2003 and a shocking $675,000 in 2001.

What all of this really serves to underscore is that if you have any questions about the new estate tax exemption or would like to learn more about creating an estate plan, consider speaking with an experienced legal professional as soon as possible.

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