The federal estate and gift tax exemption will increase to $5,450,000 in 2016 (up from $5,430,000 in 2015). This is the total amount a person can gift during their lifetime and leave to others at death. Together, a married couple can shelter up to $10.9M. The federal estate tax rate on amounts in excess of the exemption amount will remain at 40%. Minnesota continues to have its own state estate tax (but no gift tax). Its 2016 exemption will be $1,600,000 per person (up from $1,400,000 in 2015). As a reminder, this exemption will increase by $200,000 increments each year until 2018 when it will cap at $2,000,000 per person. Minnesota, however, does not recognize portability between spouses, making it essential to incorporate estate tax planning provisions into your estate plan if your combined assets exceed $1.6M and your goal is to avoid Minnesota estate tax at the second death. The annual federal gift tax exclusion amount will remain at $14,000 per year.
2016 Estate and Gift Tax Update
