Most people who aren't in the top 1 percent of earnings don’t believe they have to worry about estate planning, but that isn’t true, according to John McManus, founding principal of McManus & Associates in New York.
Even though individuals who earn between $250,000 and $1 million won’t have to worry about paying federal estate taxes, since the exemption is $5.25 million, they still have to worry about state exemptions, which are all over the map.
He cautioned anyone submitting a gift tax return to have a professional submit the paperwork for them, otherwise they are more likely to get audited by the Internal Revenue Service.
“Now that the IRS is not auditing estates under $5.25 million, they have opportunities to look at gift tax returns because they have more time on their hands,” he said. “They will look to challenge gifts and gift tax returns that are not done in the consistency and continuity of how the tax law reads.”