Estate Planning Under New Tax Law

With the new tax law, and the Federal Estate Tax exemption at more than $11 Million per person, the question arises: Is Estate Planning Now Dead?

The answer is without question: No, estate planning is certainly not dead!  Planning is as important as ever.  The change in tax law merely provides an opportunity to focus on other priorities, including providing for care and protection of minor children, determining the right decision makers, and achieving charitable and family goals.  The list of planning considerations is as diverse and as unique as each individual, and the for those who no longer planning around the Federal Estate Tax, this is a great opportunity to make sure other planning objectives are achieved.

New Tax Law

Happy New Year!

We have some big tax changes. Highlights of the new tax law’s impact on your estate planning:

  • Federal Estate Tax:
    o The federal estate tax exemption amount has doubled. In 2018, each individual has a $11.2 Million exemption amount. This is double the 2017 exemption of $5.49 million per person.
    o As with recent years, the federal estate exemption amount will continue to be adjusted annually for inflation.
    o Portability remains. This means in 2018 a married couple can collectively pass $22.4 Million without Federal Estate Tax.
    o The stepped-up basis remains.
    o The top federal estate tax rate, on transfers more than the exemption amount, remains 40%.

 

  • Gift Tax:
    o The gift tax lifetime exemption amount has similarly doubled, now at $11.2 Million per person as well.
    o In 2018, the annual gift tax exclusion is $15,000 per person, an increase of $1,000 from 2017. The annual exclusion will continue to be annually adjusted for inflation.

 

  •  Generation Skipping Tax (“GST”)
    o The GST has also doubled in 2018, to $11.2 Million per person.

But note that under the new law, on January 1, 2026, these increases will all revert back to 2017 amounts.

With these significant changes in tax exemptions, it’s a good time to pull out your estate planning documents and review your plan. If your estate benefits from these exemption increases, you will want to evaluate whether to make gifts prior to the 2026 return to 2017 amounts.

It is also a good time to make sure your documents reflect your current intentions. In additional to reviewing who are the beneficiaries of your estate, review all of your decision makers. Include your incapacity documents in this review (Power of Attorney and Health Care Representative) and make sure you still have the correct persons named.