Although this is the North Carolina Estate Planning Blog, much of what I blog about applies to folks all over the country. Since I am licensed in Tennessee and have clients there, I thought it was appropriate to report on these important changes in Tennessee transfer tax.
Almost halfway through 2012, the State of Tennessee approved a retroactive repeal ofgift tax. The appeal affects all gifts made on or after January 1, 2012 (Senate Bill 2777/House Bill 2840). Residents of Tennessee no longer have the liability of a state gift tax; however federal obligations are still active and required.
Before the repeal was approved, Tennessee’s gift tax fit two different categories and was calculated on a varied rate depending on the category. The repeal does not affect filing requirements for gift tax returns for gifts prior to 2012. Any gifts made prior to January 1, 2012 are taxable.
In addition to doing away with the state gift tax, Tennessee is beginning a repeal of its inheritance tax as well. Lawmakers approved an estate tax exemption that increases annually starting in 2012, moving up to $5,000,000 in 2015, and then removed entirely in 2016 from then on.
With the new legislation changes, here are three Tennessee estate planning tips and opportunities:
1. Create a trust – Since there is no longer a TN gift tax, a carefully prepared trust will go even further to ensure your wealth is passed on according to your wishes and that you take full advantage of federal gift tax exemptions. Gifts made to a trust are protected from future estate and inheritance taxes, from creditors’ claims, and they keep assets in the family line.
2. Update your estate plan – Now is the perfect time to review your estate plan, or create one if necessary, with the assistance of a Tennessee estate planning attorney.
3. Asset protection plans – With your estate planning lawyer, discuss the benefits of trusts and LLCs to protect your hard-earned assets from the whims of juries and the courts.