2015 and 2016 Federal Estate Tax Law: Out Like Lamb and in Like Lamb – Where is Lion?
In contrast to the uncertainty of years past, 2013 through 2015 have been years of estate tax planning calm. 2016 will likely be the same. We are past the confusion of 2001 through 2012, when we were unsure if a new year meant the estate tax exemption was going up, going down, or going away.
Since 2013, the federal estate tax exemption has been $5 million per person, indexed for inflation. So each individual can protect $5, 450,000 as of 2016 ($10.9 million for a married couple). Thus, the federal estate tax is no longer an issue for most decedents. Only for those affluent taxpayers with assets exceeding roughly $11 million, do advanced estate tax strategies remain necessary, such as GRATS, gift/sales to IDGT’S, and strategic charitable planning techniques.
Of course, federal tax law is not in stone. But even with Presidents and Congress members changing, it is unlikely the exemption amount will ever return to $1 million, which was the default amount prior to the "permanent" $5 million amount enacted in 2012.
This is all good news. So is there a "lion," i.e., uncertainty or adverse changes looming in 2016? Maybe, but only adverse changes affecting the wealthy. The IRS has indicated new Regulations may eliminate or reduce valuation discounts applicable to assets transferred to family transfers. Discounting of family asset transfers has been a major tax strategy of the wealthy. However, as of the start of 2016, valuation discounting still is allowed.