Orsbon & Fenninger, LLP

Estate Planning and Estate Administration

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Estate tax exemption for 2017

North Carolina does not have an estate tax, and the Internal Revenue Service has raised the estate and gift tax limit for 2017 to $5.49 million for individuals. The gift tax exclusion is still at $14,000 just as it has been since 2014. For couples, the total exemption is $10.98 million. In all, this is a total increase of about $80,000 for a couple. This could be used to fund a trust among other wealth-building strategies.

It is important for couples to understand the rules around portability. Taking a spouse's unused exemption must be done on the estate tax return of the deceased spouse. The fate of the estate tax exemption after the election remains uncertain. Hillary Clinton has proposed lowering the exemption while Donald Trump has suggested repealing it in favor of a carryover basis regime for high-value estates.

The lifetime gift exemption is part of the estate tax, but the annual gift tax exclusion is separate. Grandparents may want to gift money to their grandchildren or set up 529 college savings plans for them among other uses of the gift tax exclusion.

Even people with smaller estates who do not need to worry about the estate tax may want to discuss tax laws with their attorney when they are making an estate plan. For example, they might want to set up their estate planning in a way that will help keep taxes low for their beneficiaries. They may want to put assets in a trust or set up a trust in a way that benefits both a charity of their choice and beneficiaries. It is important that beneficiary designations on accounts such as IRAs be up to date so that the accounts do not end up a part of the estate rather than going directly to beneficiaries.

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