Many individuals in Northern California have been meaning to get around to estate planning for some time. Some people may make it their New Year’s resolution to prepare an estate plan in 2016. Preparing an estate plan is extremely important for those who wish to avoid probate and have their assets distributed according to their wishes. For those who plan to prepare an estate plan in 2016, there are a few things of which to be aware.
The federal estate and gift tax exemption will increase by $20,000 to $5.45 million as of January 1, 2016. The exemption has increased significantly over the past ten years and is adjusted for inflation every year. The estate of a person who dies in 2016 will not be subject to federal estate or gift tax as long as the person’s gross estate and prior taxable gifts do not exceed the exemption amount. Married couples can combine their exemptions; if the first spouse to pass away does not use their entire exemption, the surviving spouse can use any unused amount.
As we discussed in an earlier post, California has effectively repealed its estate and inheritance taxes. The result of this and the high amount of the federal exemption means estate taxes are not a major concern for most people. For those with significant wealth, there are a number of strategies to reduce unnecessary taxation.
Those who are planning to undertake estate planning in 2016 will have a lot of questions. An experienced California estate planning lawyer can help provide answers and prepare a plan that takes advantage of current laws.
Source: The Motley Fool, “Estate Planning in 2016: Here’s What You Need to Know,” Dan Caplinger, Dec. 11, 2015