The idea of an estate tax might be uncomfortable for some people in Tennessee, but continuing changes to the current estate and gift tax exemption may come as good news. The Internal Revenue Service announced that it will increase the current exemption, which is a temporary measure established through recent tax cuts. This new information is important to take into account during estate planning.
In 2000, the exemption for the federal estate tax was $675,000 for individuals. Although this might seem like an extremely high limit, it can actually be quite easy to hit once the entirety of a person’s estate. Assets like homes, vehicles, retirement savings accounts, life insurance policies and more could all end up being lumped into an estate’s worth without the proper estate planning, which left many people vulnerable to a heavy federal tax.
However, by 2013 that limit was raised to $5 million. In 2018 it was raised again to $11.18 million, and the IRS said it will raise the exemption limit once more in 2019. Individuals can look forward to a hefty $11.4 million exemption limit, or $22.8 million for married couples. These are only temporary measures though, as the tax cuts are set to expire by the end of the year 2025. Opponents of the estate tax are fighting to make these changes permanent.
Even if a person’s estate falls far below the $11.4 exemption for the federal estate tax, estate planning is still an important task. Without a will, an estate could be tied up in Tennessee probate court for a significant period of time, eating up money and time along the way. By taking note of changing rules and exemptions regarding taxes, considering their final wishes and implementing those into an actionable estate plan, individuals can ensure an easier process for their surviving family members.