In addition to planning for 2008, individuals also should be looking forward to 2009 and beyond. The gift tax annual exclusion amount will increase from $12,000 to $13,000 on January 1, 2009. This means that an individual may give $13,000 (and a married couple electing to gift-split may give $26,000) to any person in 2009 without any gift tax consequences. This also means that a single donor may then transfer up to $65,000, and a married couple may then transfer up to $130,000, to each Section 529 Plan.
In addition to the increase in the gift tax annual exclusion, the Federal estate tax applicable exclusion amount also will increase in 2009. This is the amount that an individual can pass at his or her death free of Federal estate tax. As of January 1, 2009, the Federal estate tax exclusion amount will be $3,500,000. (Please note that the donor’s lifetime gift tax exclusion amount will remain at $1,000,000.)
While there has been much discussion in the past about the scheduled repeal of the Federal estate tax in 2010, it seems more likely that legislation will be enacted making the $3,500,000 Federal estate tax exclusion amount permanent. We discuss the legislative outlook later in this alert.