Repeal of Tennessee Inheritance Tax Effective January 1, 2016
Happy (Belated) New Year! We have great news regarding changes in the inheritance tax laws that may impact you, your family, or your clients.
As of January 1, 2016, Tennessee no longer has a state inheritance tax. This change means that going forward, Tennessee estates will not pay Tennessee inheritance taxes so long as death occurs in 2016 or later.
Additionally, Federal estate tax thresholds remain at historically high levels. Single individuals are exempt from estate taxes for estates under $5.45M in 2016. Married couples may carry over a spouse’s exemption (a legal concept called “portability”). If a timely election is made, the estates of married couples can potentially qualify for up to $10.9 million in estate tax exemption in 2016.
Because of these changes, the vast majority of Tennessee estates will no longer pay any form of inheritance or estate taxes. However, income taxes remain a concern and can apply to Tennessee estates and trusts.
Given the changes in the current tax law, many Tennesseans are taking this opportunity to review their existing estate plans. The elimination of the inheritance tax may provide you and your family a number of different opportunities to update an existing estate plan.
Many people are finding that the changing tax laws enable them to simplify their estate plans. Without a Tennessee inheritance tax and with a high Federal estate tax exemption, some people may no longer need the complex plans they designed to minimize their inheritance tax burden. Instead, they are revising their old tax-sheltering estate plans into simple, easy-to-administer estate plans.
Additionally, many clients are finding opportunities to do income tax planning and trust planning due to these new changes in the law.
We encourage you to take a moment this new year to review your existing estate plan in light of the new tax laws. We believe that as you do, you may find ways to better meet the current needs of this new tax environment.