Dec. 2, 2025

IRS ANNOUNCES INCREASED GIFT AND ESTATE TAX EXEMPTION AMOUNTS FOR 2026

The IRS has announced increased gift and estate tax exemption amounts for 2026.
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Welcome afternoon, Michiganers, and welcome back to Tuesday with Tom,

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Michigan's Only podcast, where we talk about estate planning, a

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state settlement, and everything in between. As always, I'm your host,

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Tom Doyle, a state planning attorney, lifelong Michigan resident, an

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ambassador for all things good in this great state of Michigan. Welcome,

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Welcome to today's program. Will recap last episode the pending

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phase out of the US penny. If you haven't heard

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about it, listen to last week's episode. But if you've

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heard about it, you know that the US stopped minting pennies.

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So I talked about that in last week's episodes. What

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that means for you in going forward with spending your money.

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Today's show, well, twenty twenty six is right around the corner,

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so it's time to talk about the I r s's

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announcement of increase gift and the state tax exemption amounts

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for twenty twenty six.

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But please remember what I'm about.

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To discuss is meant to be educational and informative. It

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is not legal or tax advice. Every person's situation is different,

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so be sure to talk to your attorney and tax

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advisor to determine what is appropriate for you and your

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estate plan and tax planning. IRS announces increase gift and

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estate tax exemption amounts for twenty twenty six. It's that

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time of year the IRS starts telling us what some

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of the tax considerations are going to be next year.

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So let's start with the.

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Annual gift tax exclusion. Each year, the IRS sets the

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annual gift tax exclusion amount, which is that amount that

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a tax payer can give per person without any gift

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tax consideration. So in twenty twenty six, that number is

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going to stay the same as it was this year

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twenty twenty five, at nineteen thousand dollars per person that

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you want to make gifts.

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Two.

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If you're married. Married couples can double that amount. It'll

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still be nineteen thousand dollars per individual. But obviously double

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that amount is thirty eight thousand dollars. So you and

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your spouse, let's say that you've got three kids, five grandkids.

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Let's just do the math.

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You could actually transfer three hundred and four thousand dollars

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in twenty twenty six to your children and five grandchildren

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without touching the overall estate gift and federal estate tax

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exemption amount. Obviously, what that means is you could potentially

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transfer substantial assets gift tax free.

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So if you're.

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In a situation with a high value of state and

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you're considering gifting as a strategy, which is sometimes used

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for the purpose of reducing the size of the estate,

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consider those gift tax exemption amounts. Or if you're not

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even in a federal state tax issue, but you're concerned about, hey,

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how much can I give somebody in twenty twenty six

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without having to worry about filing a gift tax return, Well,

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that amount's going to stay the same nineteen thousand dollars

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per person to that you're making the gifts to which

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a married couple can double it. Remember too, though, if

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you are that high value of state, you can also

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consider front loading a five twenty nine plan. I've had

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other episodes of Tuesday with Tom where I've talked about

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twenty nine plans what they are. It's basically setting money

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aside to pay for educational expenses. But in twenty twenty six,

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just as in the past, you can actually front load

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a five to twenty nine plan with five years worth

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of gifts. So if you're going to set up a

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five to twenty nine plan in twenty twenty six. Let's

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say for a grandchild, you could front load it with

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five years worth of gifts, So that would be a

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single person could front load it up to ninety five

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thousand dollars, or a married couple could contribute up to

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one hundred and ninety thousand dollars for that grandchild's five

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twenty nine. So it's another way of using gifts that

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are not taxable in order to shrink the size of

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the estate and transfer assets out of the estate. So

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if that's something that you're thinking about five twenty nine

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plans and you're in a high value estate, consider talking

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to your tax advisor about that being a strategy. Something

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important to remember, though, gifts to non US citizens spouses

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are going to be treated differently. Generally, Generally, spouses who

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are both US citizens can transfer unlimited amounts to each other.

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So when we talk about this nineteen thousand dollars gift

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exemption amount, we're not talking about gifts to spouses. US

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citizens can transfer an unlimited amount of their estate to

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each other without incurring any gift taxes or without using

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up the federal state tax amount. Any amount, though that

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would be transferred to a spouse without depending upon what

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your tax planning, might well be taxed at the death

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of the SIVI spouse once we use up the federal

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state tax exemption.

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Amount we're going to talk about that in a minute.

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But gives to non.

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US citizens spouses though are limited. Why because a US

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citizens spouse might not be subject to US of state tax,

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they might take the assets out of the US and

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when they die, there's not going to be a federal

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estate tax that's going to be collected. So the law

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puts restrictions on how much can be transferred to a

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non US citizen spouse.

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And when the reception is not a usit and spouse.

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Regardless of whether the non US citizen's spouse is a

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resident or non resident in the United States, there is

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still this annual limitation amount, and so in twenty twenty six,

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the amount that can be transferred to a non US

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citizen's spouse is limited to one hundred and ninety four

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thousand dollars. Obviously, that can be dramatically different than if

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you're talking about an unlimited amount being given to a

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US spouse.

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So if you're if you've.

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Got a non US spouse, your limitation is going to

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be in twenty twenty six transferring one hundred and ninety

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four thousand dollars to that non US spouse, well, how

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without having to worry about gift taxes being paid.

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So that's the gift part.

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You can make gifts and in twenty twenty six, ohs

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of the going to be the numbers that you have

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to work within gifts.

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The other piece of the puzzle.

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Though, is the federal what we consider generally the federal

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estate tax exemption amount, and that is the amount that

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you can have in your estate when you die before

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you have to worry about having a federal estate tax

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paid on that amount. So under the One Big Beautiful

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Bill Act that was passed, that lifetime federal estate tax

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exemption amount is in twenty twenty six fifteen million dollars

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in twenty twenty seven, and going forward that amount will

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be increased by an inflation factor. And unlike what we

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were dealing with most recently, under the One Big, Big

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Beautiful Bill Act, that fifteen million dollars is now the

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set threshold amount, meaning it's not scheduled to sunset like

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was potentially going to happen in twenty fifteen, So that

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means a single person you die in twenty twenty six,

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you don't have to worry about federal estate taxes unless

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you're estate is more than fifteen million dollars. Now, one

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also has to consider, though, that it is a lifetime

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exemption amount. So think about you've got this coupon for

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fifteen million dollars. If you during your lifetime made taxable gifts,

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those would be gifts that exceeded the annual exemption amount

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for gifts. Those amounts will have to be subtracted from

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that fifteen million available to you at the time of

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your death to determine what's actually going to be due

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to the Feds.

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But fifteen million.

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Dollars per person, what does that mean for married US

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couple US citizens? You can double that essentially, and we

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generally talk about as married US citizens are going to

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have a thirty million dollar estate tax exemption amount that

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we can start working with in twenty twenty six. Again,

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that thirty million dollars will be reduced if gifts have

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been made during your lifetime that exceeded that annual gift

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exemption amount that we just talked about. So you've got

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this thirty million dollars for a married couple. Portability that

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I've talked about in previous episodes is the concept that says, hey,

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if when the first spouse dies, their estate is not

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worth fifteen million dollars, Let's say the first spouse dies

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in their estate's only worth.

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Five million dollars.

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Well, under this concept of portability, that unused ten million

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dollars can be transferred to their US spouse, so that

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US spouse now has their own fifteen million million dollars

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and in this situation the additional ten from their deceased spouse.

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So portability is what really allows a married couple US

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citizens to essentially have between the two of them thirty

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million dollars between the two of them. Four purposes of

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federal estate tax exemption amount before we have to worry

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about any federal estate taxes. Now. An important consideration, though,

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is this Normally in the normal world, when we're not

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looking at portability, a federal estate tax return only has

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to be filed if your estate exceeds that lifetime exemption amount.

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What does that mean?

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So for an individual, let's say you have not made

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any gifts during your lifetime, that exceeded that annual amount,

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so you've got this entire fifteen million dollars coupon available

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to you at the time of your death. In the

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normal world, if you only had an estate of five

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million dollars when you died in twenty twenty six, we

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would not file a federal estate tax return because there's.

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No tax due.

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We would not file a federal estate tax return unless

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your estate exceeded that fifteen million dollars. But if you

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want to take advantage of portability, meaning you want to

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transfer to your surviving spouse the unused portion of your coupon,

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in that case, a estate tax return will have to

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be filed for you in order to transfer your unused

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exclusion amount to your surviving spouse. So when when a

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spouse dies, very important planning to look at and say,

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are you going to have a federal estate tax return

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filed even though there's no federal state tax do And

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that gets in the whole discussion of do you want

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to pass on to your surviving spouse the unused.

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Portion of your federal state tax return. Well, think about this.

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Let's just take as an example, young couple, Okay, and

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oftentimes let's just say you know, somebody has just come

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out of medical school, medical school.

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Just take that as an example.

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One of the spouses just come out of medical school

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and they don't really have much yet other than perhaps

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a lot of debt for having gone to medical school.

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But that spouse who one of them dies, the surviving

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spouse might, if they're the physician, might have a substantial

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capacity to develop an increase and have a very sizable

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estate at some later point in time. So in that situation,

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even though the spouse who died first really has little

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if anything by way of an estate, it might be

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appropriate long term planning to still have a federal state

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tax return prepared for that spouse so they can pass

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on that exemption amount to the surviving spouse, who might

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well need to be using it down the road at

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the time of their deaths. So portability is an important

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consideration that has to be has to be looked at

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in every situation when a spouse passes away. So in

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summary twenty twenty six, you can give up to nineteen

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thousand dollars per recipient married couple. That's thirty eight thousand dollars. Again,

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you could increase that by front loading to a five

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nine plan. If you're going to do that, gifts to

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non US spouses are going to be limited to the

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one hundred and ninety four thousand dollars, not the unlimited

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amount that is otherwise available to US citizen spouses. And

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the lifetime federal state tax gift exemption will be at

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fifteen million dollars in twenty twenty six twice that is

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thirty million for a married couple, and considering that concept

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of using portability, that essentially means between the married couple,

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there can be a thirty million dollars worth of a

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state that we don't have to worry about if upon

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death the federal estate the estates don't exceed that thirty

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million dollar amount. Well. As always, though, Amanda and I

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would be honored to help you protect the people that

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you love, whether that means creating a new estate plan

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for me, for you, or perhaps updating in a state

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plan that you already have, discussing some of these tax

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issues that we've already talked about. Now, we're not tax attorneys,

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but we could have discussions with you and work with

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your tax advisor to the extent that legal assistance was

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needed in doing that, or maybe you're handling the estate

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for a loved one who's recently died, and you're looking

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for some assistance in guiding you through the estate settlement

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process during what is going to be a very difficult.

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Time for you.

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Will we try to make everything as easy and convenient

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as possible to get started. We can offer you an

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in person appointment that can either be in ground Rapids

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or our lancing location. We offer wherever you happen to

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be in the state of Michigan, virtual consultations. Those can

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be by zoom or phone. So wherever you happen to

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be in the state of Michigan, we should be able

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to be of assistance to you. We've got any number

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of clients throughout the entire state of Michigan. Remember two,

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If all you're looking for is one document, maybe you're

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looking and saying all I need is an updated, durable

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power of attorney. Well, we offer through our legal Store

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the ability to order individual documents that can be prepared

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and delivered to you electronic. Now all of that, how

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to schedule an in person consultation or virtual consultation or

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the legal store that I've just talked about, those are

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all available through our website, which is DOYLELOWPC dot com.

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So I encourage you go to DOYLELOFPC dot com today

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where you can learn more about how to schedule your

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consultation and have us set up to be.

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Working with you.

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Well, taxes are never fun to talk about, so I

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think that's going to be a wrap for today's show.

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As always, though, if you have a comment about the program,

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a question you're like answered, or a topic that you'd

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like to have me cover in future episodes, head on

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over to Tuesday with Time dot com. There you can

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leave me a voice message by clicking on the microphone

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or just send me an email. That would be Tom

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at Tuesday with Tom dot com. And so you don't

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miss episode of the program, be sure to follow us

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follow us the podcast on any platform that you're using

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to listen to Tuesday with Tom, and you can also

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follow us on Facebook, follow the office on Facebook and

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invite your friends and family to do so. That would

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be Tuesday with Tom and the office is Doyle Law PC.

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Don't forget too to subscribe to our email list that

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would be at Tuesday Withthtime dot com so that you

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can stay up to date with new episodes and important

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estate planning tips, and of course you can always listen

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to the show most likely wherever you enjoy your podcast

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run Apple Podcasts, Spotify, Amazon Music, Google Podcast, iHeartRadio, Speaker

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and many other podcast platforms. If you're using a platform

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and you can't find Tuesday with Tom on your platform,

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reach out to me. Send me an email Tom at

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Tuesday with Tom dot com and we'll see what we

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can do to put the program on your favorite listening platform.

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And remember two, you can always ask your smart speaker

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to play Tuesday with Tom. Well, thanks again for spending

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part of your day with us, and as always, I

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hope you have an awesome day and an awesome week

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here in Michigan.

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Stay safe.

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Tuesday with Tom has been brought to you by the

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estate planning attorneys at Doyle Law PC. To learn how

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we can help you with your estate plan or with

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settling a loved one's estate, please call us today at

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five one seven three two three seven three sixty six.

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That's five one seven three two three seven three sixty six.