Death and taxes are two things that no one likes to think about. According to the old saying, however, they are the only two things that are certain in life. Taxes have been on many people’s minds recently due to the massive tax overhaul passed by the Trump administration in December of last year.
Without a doubt, the new tax law is going to have far-reaching impacts on multiple issues. One of these is estate planning. Whether you are still considering planning your estate or you have already begun, here are a few ways that the new tax reform bill could affect your estate planning process.
There are some rules from the previous tax code that will remain the same. The rate of the Gift tax, for example, will hold steady at its current 40 percent. The basis adjustment rules also will not change. These are the rules ensuring that the assets passed from a deceased person’s estate to a beneficiary will be adjusted for market value.
There is good news for individuals with high-asset estates: the tax law has increased the amount of money that is exempt from Gift, Estate and Generation Skipping Transfer taxes. Currently, the Estate/Gift/GST exemptions are capped at $5 million. That amount will double to $10 million as of next year. Further, the annual Gift tax exclusion, currently limited to $14,000, will also increase. In 2018, transfers of up to $15,000 will be excluded from the Gift tax.
These exemptions will expire in December of 2025, though, unless Congress moves to extend them. The next seven years would be a good time to take advantage of the increased exemptions by making gifts to your beneficiaries. If you are interested in making gift transfers or other otherwise planning your estate, a local estate planning attorney who is up to date on the new tax laws can assist you.