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2018 IRS Contribution Limits for 401k, 403(b) and IRA Retirement Accounts.

Posted on Nov 26 2017 3:06PM by Attorney, Jason A. Lee

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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TAGS: Retirement plans - 401k etc., Taxes Comments [0]
  
 

New IRS 2016 Limits for Federal Estate and Gift Tax Exemptions; Tennessee Inheritance Tax Abolished in 2016

Posted on Jan 3 2016 4:35PM by Attorney, Jason A. Lee

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. 

 

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Tennessee and Federal Estate Tax Exemptions Raised Today for 2015.

Posted on Jan 1 2015 11:13AM by Attorney, Jason A. Lee

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!

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IRS Recently Announced 2015 Limits for Estate and Gift Tax Exemptions

Posted on Dec 6 2014 3:59PM by Attorney, Jason A. Lee

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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New 2015 IRS Contribution Limits for 401k, 403(b) and IRA Retirement Accounts.

Posted on Nov 2 2014 9:32PM by Attorney, Jason A. Lee

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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New 2014 Tennessee Statute Increases Number of Estates that Are Not Required to File Inheritance Tax Return

Posted on Jul 28 2014 10:17PM by Attorney, Jason A. Lee

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. 

 

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Tennessee and Federal Estate Tax – Are Revocable Living Trusts Included in the Taxable Estate of a Tennessee Decedent?

Posted on Feb 16 2014 11:30PM by Attorney, Jason A. Lee

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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Tennessee and Federal Estate Tax Exemptions Raised Today for 2014.

Posted on Jan 1 2014 10:20AM by Attorney, Jason A. Lee

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!

 

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What is the Federal Estate and Gift Tax Exemption for 2014?

Posted on Dec 15 2013 4:22PM by Attorney, Jason A. Lee

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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Tennessee Inheritance Tax – Are Life Insurance Policies Included in the Estate of the Decedent for Tennessee Inheritance Tax Purposes?

Posted on Oct 20 2013 10:33PM by Attorney, Jason A. Lee

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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Jason A. Lee is a Member of Burrow Lee, PLLC. Contact Jason at 615-540-1004 or jlee@burrowlee.com for an initial consultation on wills estate planning and probate issues.

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Tennessee Wills and Estates Blog
Jason A. Lee, Member of Burrow Lee, PLLC
611 Commerce Street, Suite 2603
Nashville, TN 37203
Phone: 615-540-1004
E-mail: jlee@burrowlee.com

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