2016 Exemption and Annual Exclusion Amounts

The Federal estate, gift and generation-skipping transfer (“GST”) tax exemption amounts will increase in 2016 to $5,450,000 for individuals and to $10,900,000 for married couples, from $5,430,000 and $10,860,000, respectively, in 2015. Clients should consider taking advantage of the increased gift tax exemption amount and GST tax exemption amount by making gifts to children and/or grandchildren either outright or to new or existing trusts. For married clients who have previously used their full gift tax exemption amounts, the increased gift tax exemption amount allows for a transfer of an additional $40,000 in 2016 without the imposition of Federal gift tax. For gifts in excess of the gift tax exemption amount, Federal gift tax is imposed at a 40% rate.

Additionally, the amount each person may give annually to an unlimited number of recipients without incurring gift tax and without using any of the gift tax exemption amount remains at $14,000 in 2016. Married couples, therefore, may make annual exclusion gifts of up to a total of $28,000 to an unlimited number of recipients. It should be noted that there is an unlimited gift tax exclusion for amounts paid on behalf of an individual directly to medical care providers for medical care and to educational institutions for tuition.

If you have any questions or would like to discuss your situation in further detail, please call or email us.