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Federal estate tax exemption projected to go up next year

Not all estates are subject to the federal estate tax. Rather, the tax only applies to estates that have a value above the currently applicable exemption amount.

This exemption amount has not been one constant number, but rather has shifted over time. Multiple things can lead to the exemption amount changing. One are changes in federal law. Another is inflation. This is because the exemption amount is inflation-indexed under current law.

Recently, Wolters Kluwer Tax & Accounting US made some projections regarding what the exemption amount will be next year given inflation indexing. Specifically, it projected that next year's federal estate and gift tax exemption amount will be $5.45 million. This would be a slight increase from the current exemption amount, which is $5.43 million.

Thus, it appears that next year, estates might be able to have a little more in assets without triggering the federal estate tax than they currently can.

Changes when it comes to the exemption amount and other aspects of the federal estate tax are something it is very important for high-asset individuals to stay aware of. Such changes could impact whether their estate, upon their death, would trigger an estate tax liability. Such changes could also impact how well-suited their current estate planning devices, such as trusts they currently have in place, are for addressing the estate tax planning issues they face.

Properly updating one's estate tax planning when there have been legal changes or circumstance changes can be very important. Attorneys can help high-asset individuals with gauging whether their current estate plan does properly account for important estate tax planning issues and estate tax changes, and help them with adjusting their estate plan if it does not. 

Source: Forbes, "The 2016 Projections For Estate And Gift Tax Limits," Ashlea Ebeling, Sept. 18, 2015

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