Stern, Kory, Sreden & Morgan, AAC
Newsletter
What is the applicable exclusion amount?

The applicable exclusion amount effectively exempts a certain amount from the federal gift and estate tax. In other words, if you are a U.S. citizen or resident, you will be able to leave a certain amount of your property free from this tax.

Here is the current table:

Estates of those who die during:

The applicable exclusion amount is:

2016

$5,450,000 plus any deceased spousal unused exclusion amount

2017

$5,490,000 plus any deceased spousal unused exclusion amount

2018

$11,200,000* plus any deceased spousal unused exclusion amount

*2018 amount may be adjusted by the IRS. After 2025, the amount is scheduled to be cut by about one-half.

Generally, any portion of the applicable exclusion amount used for gift tax purposes effectively reduces the applicable exclusion amount that will be available for estate tax purposes.

It is especially important for spouses to understand the applicable exclusion amount. For 2011 and later years, the applicable exclusion amount is portable. That means that each spouse is entitled to an applicable exclusion amount (referred to in this context as the basic exclusion amount). If the estate of the first spouse to die does not use all of its applicable exclusion amount, the executor can elect to transfer the unused portion to the surviving spouse. The surviving spouse's estate can then add this unused portion to its own basic exclusion amount. The sum is referred to as the applicable exclusion amount. So, for example, say that the husband dies in 2011 and his estate uses $3 million of its basic exclusion amount, and the executor of the husband's estate elects to transfer the balance of $2 million to the wife. The wife dies in 2018. Her estate is entitled to an applicable exclusion amount of $13,200,000 (her own basic exclusion amount of $11,200,000 plus her husband's unused portion of $2 million).



Prepared by Broadridge Investor Communication Solutions, Inc, Copyright 2011