Under current law the federal estate tax, gift tax, and generation-skipping transfer tax exemptions have become unified and are indexed for inflation on an annual basis. Since 2011, the exemption and tax rate have changed as follows:
Year Exemption Tax Rate
2011 $5,000,000 35%
2012 $5,120,000 35%
2013 $5,250,000 40%
2014 $5,340,000 40%
2015 $5,430,000 40%
The annual exclusion from gift taxes is also indexed for inflation on an annual basis but only in $1,000 increments. Since 2011, the annual gift tax exclusion has changed as follows:
While the IRS will not officially release the 2016 inflation-indexed exemption and exclusion until later in October, Wolters Kluwer Tax & Accounting has released its 2016 predictions based on historical inflationary trends. According to Wolters, the exemption should end up at $5,450,000 in 2016, or $10,900,000 for married couples. While this is a mere $20,000 per individual / $40,000 per married couple increase over the 2015 exemption, it is a whopping $450,000 per individual / $900,000 per married couple increase since 2011. Unfortunately, Wolters anticipates that the annual gift exclusion will remain at $14,000 for 2016.
Wealthy individuals and couples should continue to monitor these inflation-indexed numbers and plan accordingly. We will update you on the official 2016 numbers once they are released by the IRS.