Changes to Estate Tax Exemptions 2017

November 2016

Annual Exclusion for Gifts

As of January 1, 2017 the annual exclusion amount for gifts will stay at $14,000. This means that individuals can gift up to $14,000 to any person without incurring a gift tax or having to make any required filing. The amount in excess of the $14,000 will simply reduce the federal estate tax exemption available in the year of death. For married couples, this means that they could gift $28,000 to each child without having to file any gift tax return. Tuition and medical payments can also be made on behalf of another individual and these payments are in addition to the $14,000 exclusion gifts.

Federal Estate Tax Exemption

The 2017 federal estate tax exemption amount is $5.49 million, up from $5.45 million in 2016, and $5.43 million in 2015. The federal estate tax remains at 40%.

Minnesota Estate Tax Exemption 

The Minnesota estate tax exemption amount will increase in 2017 to $1.8 million, up from $1.6 million in 2016, and $1.4 million in 2015. This state estate tax exemption will increase to $2 million in 2018. The Minnesota estate tax ranges from 10% – 16%.

Impact of the Election on Federal Estate Taxes

Since 2016 is an election year, the estate tax is receiving more attention than usual.  In this election cycle, we have two presidential candidates with drastically different views on the estate tax. We have outlined the differences below.

Donald Trump
  • Originally, wanted to abolish estate tax.
  • Recently, stated that while he would like to abolish estate tax, he would consider imposing a capital gains tax on any unrealized gains held at death. Essentially, this could result in an estate tax equal to the capital gains tax (currently 20%).
Hillary Clinton
  • Originally, called for a reduction in the federal estate tax exemption to $3.5 million and an increase in the estate tax to 45%. Current exemption amount is $5.45 million and current federal estate tax is 40%.
  • Recently, proposed increased tax rates of 50%, 55%, and 65%. The 50% rate would apply to estates over $10 million per person, the 55% rate would apply to estates over $50 million, and the 65% rate would apply to estates in excess of $500 million.

 

Please give David Ness (david.ness@fmjlaw.com), Karen Schlotthauer (karen.schlotthauer@fmjlaw.com), or Matt Jensen (matthew.jensen@fmjlaw.com) a call at 952.995.9500, if you have any questions or would like to discuss.