2014 Estate Tax Summary

Happy New Year!

I wrote a summary of the 2013 Estate Tax Essentials last year.  2013 saw some major changes to estate and gift taxes.  The adjustments for 2014, however, are only minor automatic inflation adjustments.  The federal estate, gift and GST tax exemption rose from $5.25 million to $5.34 million.

Here is an executive summary of the current estate, gift and generation skipping tax exemptions and rates for 2014:

• Exemption Equivalent: $5,340,000 (minus lifetime adjusted taxable gifts)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Portability of unused exemption to spouse: Yes (by timely election on Form 706)
• Rate: 40% (flat rate on taxable estate above exemption)

• Lifetime Gift Tax Exemption: $5,340,000 (total lifetime taxable gifts)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Annual Gift Tax Exclusion: $14,000 (same as 2013; increased by inflation indexing in $1,000 increments)
• Rate: 40% (flat rate on gifts above exemption)

• GST Exemption: $5,340,000 (minus lifetime GST exemption used)
• Inflation Indexing: Yes (rounded to the nearest $10,000)
• Portability of unused exemption to spouse: No
• Rate: 40% (flat rate on GST transfers above exemption)

• Estate Tax Exemption: $4,000,000 (not scheduled to rise)
• Inflation Indexing: No
• Gift Tax: None
• Portability of unused exemption to spouse: No
• Rate: Varies (effective rate up to around 28.5%)

The current stability in the estate and gift taxes makes this a good time complete an estate plan.

In future months, I plan to highlight the spousal portability election and the variance in state estate tax laws by jurisdiction.

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