Recently, the Internal Revenue Service announced what the gift and estate tax limits would be for the year 2015. These numbers, which are adjusted annually to account for inflation, matter to those who work with their estate planning attorney in Illinois to reduce their estates by gifting assets and money to family members or friends.

The federal state tax exemption

The federal estate tax exemption refers to the amount a person can leave to his or her heirs without needing to pay federal taxes on his or her estate. In 2015, this amount will be $5.43 million. In 2014, the federal state tax exemption was $5.34 million. This means that those planning their estates can provide their heirs with another $90,000 in assets tax-free.

The annual gift exclusion amount

The 2015 gift tax exclusion amount did not change from 2014 to 2015. Those working with their estate planning attorney in Illinois can still provide $14,000 in gifts to as many other people as they like on an annual basis to reduce their estate’s worth. However, in 2013, those with large estates were only permitted to provide others with $13,000 a year in gifts.

Couples who share an estate can each give away $14,000 in gifts to their beneficiaries every year. For example, if a couple desires to provide each of their four grandchildren with gifts, in 2015, both the husband and wife can separately provide their grandchildren with $14,000 in gifts. For four grandchildren, this would equate to $112,000 in gifts.

Providing greater gift amounts

Those who desire to provide their friends and family members with gifts in order to reduce their estate’s worth without keeping track of gift amounts for estate tax planning purposes can make specific gifts for dental, medical and tuition-related expenses. These gifts do not count towards the annual $14,000 gift tax limit as long as the provider is paid directly.

Another strategy those in the midst of planning their estates can use is to set up a 529 college savings plan for either their children or their grandchildren. These plans allow a person to put in five years of annual exclusion gifts in one of these accounts all at once. For example, a grandmother could put $70,000 in a college account for her granddaughter. Although the grandmother would have to file a gift tax return, there would be no tax on this gift amount.

These are just a few of the strategies that can be used to reduce an estate’s taxable amount. Those who desire to use more tax planning strategies while developing their estates should consider working with an estate planning attorney in Illinois.