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Federal Estate Tax Exemption – A Consideration When Addressing Estate Planning

Taxpayers don’t often find a “gift or silver lining” in government regulation. However, in 2006, Virginia repealed the Virginia Estate Tax. It appears some Virginians conceptually received two “gifts” relating to estate taxes.

There is one IRS regulation that when discussed during the estate planning process the initial reaction is usually, “I don’t have to worry, I will never have assets worth that much.”

That trigger is the Federal Estate Tax Exemption, which for 2018 is $11 million. The meaning – or gift, if you will – is that an individual can leave up to $11 million to heirs or beneficiaries and not pay a federal estate tax. In addition, if a surviving spouse may claim the unused, estate tax exclusion of her spouse, and combine it with her own; this is called portability. It is possible that the surviving spouse could have almost $22 million dollars in Federal Estate Tax Exemption available to him or her upon her death. Time is of the essence for filing the portability election; Form 706 must be filed within nine months after the decedent’s death.

If an individual’s assets exceed, or have the potential to exceed that amount, it is wise to consider the use of Trust(s). A Revocable Trust that includes the use of bypass trust language may be beneficial, as well as the consideration of an Irrevocable Trust.

If you have questions or concerns about how the federal tax estate tax exemption applies to your situation, call attorney Katherine Breckenridge (formerly Katherine S. Charapich) at the Estate Law Center, PLLC, today at 540-827-4395 or contact us online.