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Posted on Nov 26 2017 3:06PM by Attorney, Jason A. Lee
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The IRS
recently announced the new cost of living adjustments to the annual limits on
retirement contributions for 2018.
These are the limits that identify the amount of money you can
contribute to certain tax benefited retirement plans. This can and should affect how you formulate
your estate and retirement planning in Tennessee. A really good strategy for long term estate
planning is to make sure a significant portion of your assets are in these tax
advantaged accounts.
The new 2018 annual limits for contributions
to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings
Plan remains the same as the prior year at $18,500.00. This is the first change in several years and
it welcome news for retirement savers. The
annual catchup contribution allowance for these plans, available to those over
50, stands at $6,000.00 for 2018. As a result, someone over the age of 50 can
contribute $24,500.00 annually to their 401k starting in 2018.
The limit for contributions to an IRA (Roth
or normal IRA) is unchanged for 2018. It
remains at $5,500.00. For those who take
advantage of the Roth IRA, the AGI (Adjusted Gross Income) phase-out level for the
ability to contribute was adjusted up for 2018.
The phase-out now begins at $189,000.00 for married couples filing
jointly and $120,000.00 for singles and heads of household. Once you hit these levels, the ability to contribute
begins to phase out until it is eliminated.
You need to work to update your beneficiary designations
on your retirement and other accounts while you review if any of the above
changes can affect you. In Tennessee, if
you have a proper beneficiary designation, these assets can pass outside of probate. If you do not have any designation or if you
name your estate as the beneficiary, then this money will pass through your
estate in the probate process. This will
certainly extend the time it will take to get to the proper beneficiaries. Many times, the beneficiary designations do
not match the terms in the Will - and this is usually unintended. Life circumstances also change and this is an
important thing to remember so your beneficiary designations match your
intentions that are expressed in your Will.
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Posted on Jan 3 2016 4:35PM by Attorney, Jason A. Lee
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The IRS recently introduced
new cost of living adjustments to the lifetime federal estate and gift tax
exemption. The new federal estate and gift
tax exemption will be $5.45 million dollars in 2016. This is an increase from the prior exemption
of $5.43 million for 2015. This is
therefore an increase of $20,000.00 that can be passed on by gift or in your
estate, tax free starting in 2015.
Unfortunately, the annual tax free gift
exclusion amount stays at the same level at a total of $14,000.00. This is the annual amount of gifts that can
be given to an individual without counting toward the lifetime consolidated
exemption of $5.45 million for 2016. As
a result, each year you can give up to $14,000.00 to an individual using the
annual gift tax exclusion. These gifts
will not count towards your lifetime exemption amount.
As I have stated before on this blog, estate
taxes are becoming less relevant to the vast majority of Americans due to the
“permanent” fix that was provided by the federal government a few years ago. The estate tax simply does not come into play
for most people. Additionally, the
Tennessee inheritance tax is now abolished in Tennessee for any person who dies
in 2016 or later. It simply does not
exist any longer.
Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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Posted on Jan 1 2015 11:13AM by Attorney, Jason A. Lee
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Today
the Tennessee Inheritance Tax exemption (for 2015) is raised to
$5,000,000.00. Next year the Tennessee Inheritance Tax will be
abolished. Starting January 1, 2016 (for
those who die on or after that date) there will no longer be any Tennessee
Inheritance Tax obligations. The Federal
Estate Tax exemption (for 2015) was raised to $5,430,000.00 today. It is indexed to inflation and should go up
each year. As a result, these taxes
rarely come into play when dealing with estate planning in Tennessee unless you
have a very large estate. Happy New
Year!
Follow me on Twitter @jasonalee for updates from the
Tennessee Wills and Estates Blog.
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Posted on Dec 6 2014 3:59PM by Attorney, Jason A. Lee
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The IRS
recently introduced certain cost of living adjustments to the consolidated
federal estate and gift tax exemption.
The new federal estate and gift tax exemption will be $5.43 million
dollars in 2015. This is an increase
from the prior exemption of $5.34 million for 2014. This is therefore an increase of $90,000.00
that can be passed on by gift or in your estate, tax free starting in
2015.
Unfortunately, the annual tax free gift
exclusion amount stays at the same level at a total of $14,000.00. This is the annual amount of gifts that can be
given to an individual without counting toward the lifetime consolidated
exemption of $5.43 million for 2015. As
a result, each year you can give up to $14,000.00 to an individual under the
annual gift tax exclusion without it counting towards your lifetime exemption
amount.
As I have stated before, estate taxes are
becoming less relevant due to the “permanent” fix that was provided by the
federal government a few years ago.
Additionally, the Tennessee inheritance tax exemption will be
$5,000,000.00 in 2015 and it is abolished starting in 2016.
Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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Posted on Nov 2 2014 9:32PM by Attorney, Jason A. Lee
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The IRS
recently announced the new cost of living adjustments to the numerous annual
limits on retirement contributions.
These limits impact the amount of money you can contribute to a
retirement plan. This can have an effect
on how you formulate your estate and retirement planning in Tennessee.
The new 2015 annual limits for contributions
to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings Plan
has increased from $17,500.00 to $18,000.00.
The helpful annual additional catch-up contributions to these plans,
available for those over 50 was also increased from $5,500.00 to $6,000.00.
The limit for contributions to an IRA (Roth
or normal IRA) is not changed for 2015 and remains at the $5,500.00 level. For those that take advantage of the Roth
IRA, the AGI (Adjusted Gross Income) phase-out level for the ability to contribute
was adjusted up for 2015. The phase-out
now begins at $183,000.00 for married couples filing jointly and $116,000.00
for singles and heads of household.
One other important thing to always remember,
is that you need to update and keep current your beneficiary designations on
your retirement accounts. In Tennessee, if
you have a proper beneficiary designation, these accounts pass outside of
probate. If you do not have any
designation or if you name your estate as the beneficiary, then this money will
pass through your estate in the probate process.
Follow me on Twitter at @jasonalee for updates from the Tennessee
Wills and Estates blog.
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Posted on Jul 28 2014 10:17PM by Attorney, Jason A. Lee
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The Tennessee Legislature in the 2014
Tennessee Legislative Session passed Public Chapter No. 808
which greatly increases the number of Tennessee estates that do not need to file
any kind of inheritance tax return. This
new bill amended T.C.A.
§ 67-8-409. Prior to this amendment,
estates where an individual died before January 1, 2014 were exempt from filing
a Short Form
Inheritance Tax Return if the gross value of the decedent’s estate did not
exceed $100,000.00 and the trial court waived the requirement. With this new amendment, estates where the
deceased died on January 1, 2014 or after, no Short Form Inheritance Tax Return
is required as long as the gross value of the estate is $1,000,000.00 or less
(and the Court provides a waiver in the Order).
For those who die in 2015, the amount estates can be valued before the
requirement to file an inheritance tax return will be $2,000,000.00. The court can simply waive the filing of the
Inheritance Tax Return upon a statement of the gross amount of the estate (this
is generally done as a matter of course in Tennessee).
As I have previously discussed the
Tennessee Inheritance Tax will be abolished effective January 1, 2016. This new amendment to Tennessee law further
attempts to eliminate the necessity of filing Inheritance Tax Returns with the
Tennessee Department of Revenue.
Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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Posted on Feb 16 2014 11:30PM by Attorney, Jason A. Lee
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A question that is
often asked is whether putting money in a revocable or living trust somehow excludes
that money from the taxable estate for Tennessee or Federal Inheritance tax
purposes. T.C.A.
§ 67-8-307 provides that trust property is included in the taxable estate
when the decedent reserves the right to revoke, alter or amend the trust so the
decedent could retain the property (basically any revocable or living trust). As a result, property in revocable or living
trusts is generally considered to be included in the estate of the decreased
for purpose of Tennessee Inheritance Tax purposes (as well as Federal Estate
tax purposes). T.C.A.
§ 67-8-307 provides as follows:
The gross estate
of a resident shall include property specified in § 67-8-303(a)(1), and the
gross estate of a nonresident shall include property specified in §
67-8-303(a)(2) transferred by the decedent by deed of trust in which the
decedent reserved to the decedent, alone or in conjunction with others, powers
of revocation, alteration or amendment, upon the exercise of which such
property would revert to the decedent, to the extent of the value of such
property subject to such powers and with respect to which such powers remained
unexercised.
You should be very
skeptical of any revocable or living trust product that claims to remove the property
from the taxable estate. Additionally,
keep in mind that in Tennessee the Inheritance Tax will be abolished effective
January 1, 2016. Further the exemption
for the Federal Estate tax is currently at $5,340,000.00 so very few people in
fact actually need to worry about Federal Estate tax. Fear of this tax often drives people to complicated
trust products or expensive estate tax avoidance packages, however, this is
usually unnecessary when simplicity would be the better path to take, when all
things are considered. I preach simplicity in Tennessee estate
planning because often people do not follow through with the more complicated
product designs and 99% (or more) of the population simply does not need
complicated estate planning techniques.
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Posted on Jan 1 2014 10:20AM by Attorney, Jason A. Lee
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Today
the Tennessee inheritance tax exemption (for 2014) is raised to $2,000,000.00. Next year it will increase to $5,000,000.00
and then it will be abolished in 2016.
The Federal inheritance tax exemption (for 2014) was raised to
$5,340,000.00 today. As a result, these
taxes rarely come into play when dealing with estate planning in Tennessee
unless you have a very large estate. Happy New Year!
Follow me on Twitter @jasonalee for updates from the
Tennessee Wills and Estates Blog.
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Posted on Dec 15 2013 4:22PM by Attorney, Jason A. Lee
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A lot of people ask about the possible
taxation of their estate from the federal government – often referred to as the
“estate tax” or “death tax”. For the
vast majority of people, this is an irrelevant issue due to recent changes in federal
tax law that significantly increased the federal estate tax exemption. However, the IRS
has recently announced the new 2014 estate and gift tax exemption. The new 2014 federal estate gift tax
exemption is $5,340,000.00. This an
increase of $90,000.00 over the 2013 estate gift tax exemption of $5,250,000.00. As a result, it is becoming very rare that an
estate will reach this level in Tennessee, although it is still certainly
possible with large estates.
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Posted on Oct 20 2013 10:33PM by Attorney, Jason A. Lee
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Under T.C.A. § 67-8-306, life insurance policies are
included in the gross estate of the decedent when calculating the size of the
estate of inheritance tax purposes. This
is true whether the policies of insurance are payable to named beneficiaries or
to the decedent’s estates. This is a
general rule and the complete statute is as follows:
(a) If the decedent was a resident of this state, there shall be included
in the gross estate the proceeds of insurance policies payable to named
beneficiaries, or to the decedent's estate, or in such manner as to be subject
to claims against the decedent's estate and to distribution as a part thereof.
(b) This section shall include the proceeds of insurance policies
commonly known as “paid-up contracts” or “investment contracts” or “annuity
contracts” or similar types or forms of policies, the surrender value of which
was subject to the control of the decedent prior to death.
(c) Where life insurance, the proceeds of which are under the control of
the decedent, is left by the decedent in such manner that the proceeds thereof
cannot be subjected to the payment of the decedent's debts and where the
proceeds of such insurance are received by beneficiaries thereof and are not
subjected to the debts of the decedent, the fact that the decedent may have been
insolvent and that a portion of the decedent's debts may remain unpaid shall
not affect the liability for inheritance tax upon such insurance.
A lot of people
forget to consider life insurance policies when making a determination of
potential estate tax liability. This
must be taken into consideration in Tennessee.
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