As one's W-4's and 1099's start rolling in, many in Maryland are on the road to filing their annual tax returns. Yet, they should know that there are tax implications when it comes to estate planning.
First, let's discuss the gift-tax exemption. Currently, one can make gifts to family, friends and others to the tune of $5.43 million cumulatively during their lifetime before having to owe federal gift taxes. This is especially good news for married couples as they each can take advantage of the gift-tax exemption separately.
Similarly, annually a person can make gifts of up to $14,000 per person and claim it as a yearly exclusion. Like the lifetime gift-tax exemption, married couples can each make separate gifts to family and friends and still take advantage of the gift-tax exclusion. This can be especially useful to those who do not begin estate planning until later in their lifetimes. This is because the gift-tax exclusion reduces the size of one's taxable estate.
Finally, for 2015, upon their death, individuals can bequeath gifts to others in amounts of up to $5.43 million without owing any federal estate tax. Like the gift tax, married couples can each take advantage of this estate-tax exemption separately. In addition, if the first spouse passes away without having fully taken advantage of the exemption, the amounts remaining can be granted to the other spouse.
As this shows, it is important to keep estate planning in mind when preparing one's taxes. Not only can gifts affect one's income taxes and estate taxes, but they could also affect the size of one's estate upon one's death. There are many facets to estate planning -- gifts are just one of them. A Rockville probate attorney may be able to help individuals further understand the relationship between estate plans and taxes.