• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • BLOG
  • Newsletters
  • Reviews
    • Our Reviews
    • Review Us
  • Videos
  • Contact Us
  • WhoWe Are
    • A Message From Mark Costley
    • Meet Our Team
    • Communities We Serve
  • WhatWe Do
    • Advanced Estate Planning
      • Asset Protection
      • Business Succession Planning
      • Charitable Giving
      • Family Foundation
      • Family Limited Partnerships
      • Grantor Retained Annuity Trust
      • Irrevocable Life Insurance Trust
      • Planning For Charitable Gifts
    • Counseling Non-Profits
    • Elder Law and Special Needs Planning
    • Estate and Gift Tax Planning
    • Estate Planning
    • Probate & Trust Administration
    • Process
    • SECURE Act
    • Social Entrepreneurship & Business Law
  • WhyWe Do It
    • Peace Of Mind
  • Resources
    • Caregiving Resources
      • Caregiving Worksheets
      • Our Book
    • Definitions
    • Elder Law Reports
    • Estate Planning Resources
      • Estate Planning Articles
      • Estate Plan Checkup
      • Estate Planning Reports
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Elder Law
      • Estate Planning
      • Estate Planning for Parents
      • FAQs for Families Without an Estate Plan
      • Divorce and Your Estate Plan
      • Estate Planning for Women
      • Estate Planning 101
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Nursing Home Planning
      • Spliter
        • Philanthropy and Your Estate Plan
        • Planning for Dementia
        • Probate
        • Serving as Executor
        • Special Needs Planning
        • Tax Avoidance Planning
        • Trust Administration & Probate
        • Understanding the Social Security Retirement System
        • Will Contests
    • Pre Consultation Form
    • Probate Resources
      • Chapel Hill Probate
      • Raleigh Probate
    • Professional Resources

Clarity Legal Group

Estate Planning Information Center

919-484-0012 Schedule Consultation
Attend a Free Seminar
  • WhoWe Are
    • A Message From Mark Costley
    • Meet Our Team
    • Communities We Serve
  • WhatWe Do
    • Advanced Estate Planning
      • Asset Protection
      • Business Succession Planning
      • Charitable Giving
      • Family Foundation
      • Family Limited Partnerships
      • Grantor Retained Annuity Trust
      • Irrevocable Life Insurance Trust
      • Planning For Charitable Gifts
    • Counseling Non-Profits
    • Elder Law and Special Needs Planning
    • Estate and Gift Tax Planning
    • Estate Planning
    • Probate & Trust Administration
    • Process
    • SECURE Act
    • Social Entrepreneurship & Business Law
  • WhyWe Do It
    • Peace Of Mind
  • Resources
    • Caregiving Resources
      • Caregiving Worksheets
      • Our Book
    • Definitions
    • Elder Law Reports
    • Estate Planning Resources
      • Estate Planning Articles
      • Estate Plan Checkup
      • Estate Planning Reports
      • Is Your Estate Plan Outdated?
      • Top 10 Estate Planning Techniques
    • Frequently Asked Questions
      • Elder Law
      • Estate Planning
      • Estate Planning for Parents
      • FAQs for Families Without an Estate Plan
      • Divorce and Your Estate Plan
      • Estate Planning for Women
      • Estate Planning 101
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Nursing Home Planning
      • Spliter
        • Philanthropy and Your Estate Plan
        • Planning for Dementia
        • Probate
        • Serving as Executor
        • Special Needs Planning
        • Tax Avoidance Planning
        • Trust Administration & Probate
        • Understanding the Social Security Retirement System
        • Will Contests
    • Pre Consultation Form
    • Probate Resources
      • Chapel Hill Probate
      • Raleigh Probate
    • Professional Resources
Home » BLOG » Estate Planning » The 2015 Lifetime Estate Tax Exclusion & Annual Gift Tax

The 2015 Lifetime Estate Tax Exclusion & Annual Gift Tax

Historic Overview

Congress and the Wilson administration established the original federal estate tax in 1916. However, the lack of an annual gift tax limitation provided a large unintended loophole for individuals to distribute inheritances prior to their death and avoid the estate tax. The federal annual gift tax exclusion was first enacted in 1924, repealed in 1926, reenacted in 1932 and has remained in force since that time. Congress and the Reagan administration unified the lifetime and annual gift exclusions in 1981.

The 2015 Lifetime Estate Tax Exclusion

The lifetime estate tax exclusion passed in 2011 set the maximum exclusion at $5 million per individual. The individual exclusion was set at $5.43 million in 2015 because the amount resets annually and is indexed to inflation. Based on the 2015 exclusion, couples can transfer $10.86 million while they are living or after they pass away before the current 40 percent estate tax becomes applicable.

To explain by way of an example, let’s use the case of a married couple who have assets totaling $12.86 million. Together the couple may distribute $10.86 million tax- throughout their lifetime or at the time of their deaths using their combined exclusions. The $2 million in assets above the combined exclusions is subject to a 40 percent estate tax and triggers a tax liability of $800,000 at the time of their deaths.

The 2015 Annual Gift Tax Exclusion

Under the annual gift tax exclusion, individuals may distribute as much as $14,000 per person to any number of gift recipients per calendar year without impacting their lifetime estate tax exclusion. Married couples together may give as much as $28,000 per person to an unlimited number of gift recipients within each year. Every gift reduces the taxable value of an individual’s estate by $14,000 or the corresponding amount of the gift if less.

The amount may not seem like a great deal of money. However, aggregated over time, it will add up and should be used if there is a long-term strategy to provide inheritances to an extended list of individuals. The annual gift tax exclusion might also be used to fund an irrevocable trust incrementally for the benefit of someone else. This annual gift tax exclusion can also be used to give tax- gifts of shares in a family limited partnership.

Direct Payment of Educational and Medical Expenses

There are two additional annual gift tax exclusions that allow for direct payment of education and medical expenses without limitation. Individuals may give an educational gift to students for tuition expenses without using any of their annual $14,000 per person exclusion, and without impacting their unified lifetime exclusion. Books, fees, and living expenses do not fall under this exclusion; however, it is possible to utilize the $14,000 per person annual gift tax exclusion to provide for these expenses. It is important to note individuals must remit payment directly to the educational institution and funds cannot be given to the student.

An exclusion also exists for direct payment of medical expenses. This exclusion is executed in a process similar to paying for educational expenses, in that, health care providers must be paid directly. It is also possible to purchase health care insurance within this exclusion.

References

IRS

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Gift-Tax

Forbes

www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/

  • Author
  • Recent Posts
Mark Costley
Mark Costley
With more than 30 years’ experience in private practice, Mark Costley has helped hundreds of North Carolinians with estate planning, living trusts, financial law, probate, and trust administration. Mark’s work involves elements of teaching, strategic analysis and planning, documentation, and assisting clients in implementing their plans. He is devoted to providing the best in planning, efficiency, administration, and asset protection.
Mark Costley
Latest posts by Mark Costley (see all)
  • What Are the Drawbacks to Creating an ABLE Account? - May 15, 2023
  • What Is an ABLE Account? - May 5, 2023
  • What Is the Medicaid “Look-Back” Provision? - March 6, 2023

Date: February 23, 2015 Category: Estate Planning, Estate Tax, General, Inheritance

Leave a Reply

Your email address will not be published. Required fields are marked *

Clarity Legal Group

Subscribe to Our Blog

Join the Clarity Legal Group® community by subscribing to our blogs addressing estate planning, elder law, asset protection, healthcare planning, special needs planning, charitable giving and more.

  • This field is for validation purposes and should be left unchanged.

Free Estate planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

Follow Us

Address

Clarity Legal Group
1414 Raleigh Road Suite 445
Chapel Hill, NC 27517
United States (US)
Phone: 919-484-0012

reply@claritylegalgroup.com

Mailing Address
PO Box 2207
Chapel Hill, NC 27515

Exchange West Office Map

Office Hours

Monday9:00 AM - 5:30 PM
Tuesday9:00 AM - 5:30 PM
Wednesday9:00 AM - 5:30 PM
Thursday9:00 AM - 5:30 PM
Friday9:00 AM - 2:00 PM

Map

clarity_sidbr_map
  • About The American Academy
  • Disclaimer
  • Diversity
  • Sitemap
  • Privacy Policy
  • © 2023 American Academy of Estate Planning Attorneys.
    All Rights Reserved.
    Attorney Advertisement
  • Clarity Legal Group footer logo

    Clarity Legal Group is a registered Trademark and trade name for The Mark Costley Law Group, PLLC


    • Read Our 5-Star Client Reviews

"AV® , AV Preeminent® , Martindale-Hubbell DistinguishedSM and Martindale-Hubbell NotableSM are Certification Marks used under license in accordance with the Martindale-Hubbell® certification procedures, standards and policies."

x

Fill out the form below to access to the worksheets and checklists discussed in The Ultimate Caregiver Guide! After submitting this form, you can clic

  • This field is for validation purposes and should be left unchanged.