Tax Cuts and Jobs Act of 2017

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017.  The tax act does not repeal the federal estate, gift or generation-skipping transfer tax.  Instead, the new law pertaining to wealth transfer planning is as follows:

  • The estate, gift and generation-skipping transfer tax exemptions are increased to $10M, adjusted for inflation from 2011. It is anticipated that in 2018, the inflation-adjusted exemptions from each tax would be $11.2M for each individual, or effectively $22.4M for married couples.
  • The “carryover” basis provisions of current law for lifetime gifts (i.e., the recipient of the gifted property takes the giver’s income tax basis) and the “stepped-up” basis provisions of current law for gifts at death (i.e., the recipient of the gift has an income tax basis equal to the estate tax value of the gifted property) are preserved.
  • The top estate, gift and generation-skipping transfer tax rate under current law of 40% is preserved.

The increased exemptions are good for the next 8 years, absent another law change. The increased exemptions apply only to gifts made and estates of persons dying after December 31, 2017 and before January 1, 2026. In other words, the provisions “sunset” at the end of 2025 and the provisions of current law then take effect.

Those who can afford it should consider making lifetime gifts now to capture the temporarily increased exemptions. Larger, taxable gifts may be advisable in some cases. Estate plans should be reviewed to determine the effect of substantially increased exemptions on the passage of assets at death. Some families may want to adopt an entirely estate tax-free plan by leaving their exemption amounts to family and the balance of their estates to charity. Please contact us to schedule an appointment to discuss your particular situation.

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