Many people with large estates have put a lot of work into ensuring that their heirs are affected as little as possible by estate taxes. These people may welcome the news that estate tax limits will rise in 2014. These people will be able to pass on $90,000 more in the estate administration process than in 2013 without having to worry about estate taxes.
The estate tax exemption in 2014 will rise to $5.34 million dollars, up from $5.25 million in 2013. This means that people with an estate larger than that exemption can transfer $5.34 million in assets to other people through gifts when they are alive or at the time of their death without having to pay federal estate taxes. Tax experts at the Research Institute of America used the Consumer Price Index of the most recent month and the 11 months before it to report this increase and others that are expected for 2014.
Another new rule that many may be unaware of concerns how the limit is applied to spouses. Spouses can combine this exemption and pass on assets without paying estate taxes if the estate is worth up to $10.68 million when the second spouse dies.
Several other exemptions, including the gift tax annual exclusion, generation-skipping transfer tax exemption and the annual exclusion for gifts to non-citizen spouses have also been raised. These new limits could have an effect on many estates and should be planned for accordingly. Those who have planned to decrease the burden of the estate tax on their heirs may benefit from another evaluation of their estate plan. An attorney may be able to help someone determine the new limits that will affect their estate or how to use the new limits to improve their estate plan.
Source: CBS News, "Higher limits for estate tax credits in 2014", Ray Martin, September 23, 2013