The Estate Tax Concern

One big concern that clients have when we prepare wills is the possibility of North Carolina state and federal death taxes.  People see ads by attorneys and others promising to save death taxes through planning.  Thus, many of us assume that we have an estate tax problem to address, but for most situations that isn’t true.

Currently, NC does not have an estate, inheritance or gift tax.  Other states may have a gift, estate or inheritance tax, and if you own property in those states (usually real property), that property may be subject to those taxes in that state.

As far as federal estate and gift taxes are concerned, in general, transfers of assets to one’s U.S. citizen/resident alien spouse with no restrictions pass free of the federal estate/gift tax, no matter the size of the transfer.

The 2016 federal gift/estate exemption amount is $5.45 million per U.S. citizen/resident alien and such individual’s estate. To the extent that such person uses the federal gift tax exemption during his/her lifetime, it reduces the federal estate tax exemption available at death.  With some planning and the filing of a federal estate tax return to make this election after your spouse’s death within the time period allowed, the unused portion of a deceased spouse’s federal exemption amount potentially can be used by the surviving spouse — this is known as “portability”.  Thus, together, a married couple who are U.S. citizens or resident aliens can potentially pass about $11 million to their beneficiaries, free of federal estate tax.  The federal estate and gift tax exemption amount is indexed each year for inflation.

In addition to the federal exemption and “portability”, there is an annual exclusion from federal gift taxes of $14,000 per donee (or person receiving gift); this exclusion is also indexed for inflation.  Thus, in 2016 you can gift up to $14,000 of assets to an unlimited number of people without incurring a gift tax.

There are many reasons for estate planning, but for most of us, due to the high exemption amounts, the concern over potential federal estate taxes is not a main subject of concern.  This topic is more complicated than a simple article can address, and the options to deal with these gift and estate tax problems are numerous.  If you have any questions, contact the experienced estate planning attorneys at Weaver, Bennett & Bland, P.A. or talk to your CPA.

Eran L. Weaver is an estate planning, estate administration and business attorney at Weaver, Bennett & Bland, P.A.  Contact Eran at Weaver, Bennett & Bland, P.A. at (704) 844-1400.  The information contained in this article is general in nature and not to be taken as legal advice, nor to establish an attorney-client relationship between the reader and Eran L. Weaver or the law firm of Weaver, Bennett & Bland, P.A.

Weaver, Bennett & Bland, P.A. serves clients in North Carolina and South Carolina. Located in the town of Matthews between Mecklenburg and Union Counties in North Carolina since 1982, we’ve proudly provided legal services throughout Charlotte, Matthews, Mint Hill, Stallings, Indian Trail, Monroe, Marvin, Wesley Chapel, Weddington, Waxhaw, the Ballantyne area, and other surrounding communities in the Greater Charlotte region. Our clients range from national corporations and major banking institutions to individuals and local companies.