Tax Tip of the Week | No. 242 | Estate Tax Update
Tax Tip of the Week | March 19, 2014 | No. 242 | Estate Tax UpdateThe 2014 exclusion amount is $5,340,000
Laws were passed a couple of years ago that permanently set the federal tax exclusion amount on estates at $5,000,000. The law also stipulated the exclusion amount should be indexed for inflation each year. The exclusion amount for 2014 is $5,340,000. This means there is no federal estates taxes if the deceased has an estate less than $5,340,000 and no federal estate tax return needs to be filed.The law also allows for “portability” of the unused exclusion amount to surviving spouses. For example: “Joe dies in 2014 with a $3,000,000 estate that passes to his children. Joe never made any taxable gifts in his lifetime so his estate pays no estate taxes (because his estate is less than $5,340,000). The executor of Joe’s estate, however, elects to permit Joe’s wife, Mary, to use Joe’s unused exclusion amount of $2,340,000 ($5,340,000 less the $3,000,000 excluded by Joe’s estate). This means Mary will have a $7,340,000 exclusion for her estate upon her passing.”Note, however, the only way to make this portability election is to file a timely federal estate tax form (Form 706) upon Joe’s death. The IRS recently provided a simplified method for certain taxpayers to obtain an extension of time to make this portability election (see Revenue Procedure 2014-18).So even though Joe’s estate, in this example, didn’t require any federal tax return to be filed, it is still a good idea to consult with an attorney upon someone’s death to explore all the options. (Actually it would be better to have an estate plan in place prior to someone’s death.)Remember, Ohio’s estate taxes ended for anyone who died after 12/31/2012.If you have any additional questions on this Tax Tip let us know and we can refer you to some good estate attorneys.
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