You have surely heard about the new tax legislation signed into law by President Trump at the end of 2017, but what does it mean for your estate plan? Below are a few key changes to the tax law that can impact estate planning:
- The annual federal gift tax exemption increases to $15,000 this year, to be adjusted for inflation each year thereafter. This means that each individual can give up to $15,000 in gifts to as many individuals as they would like in 2018 without touching their lifetime exclusion amount.
- The lifetime gift and estate tax exclusion amount increases to $11,200,000 for each individual as of January 1, 2018, and will increase with inflation each year through 2025. This means that each individual can pass assets worth up to $11,200,000 during life and/or at death without incurring federal gift or estate taxes.
- The lifetime exclusion amount is still portable, meaning a deceased individual's unused portion can be utilized by a spouse. As such, the exclusion amount for a married couple for 2018 is effectively $22,400,000.
- On January 1, 2026, the lifetime exclusion amount will drop back to the 2017 level ($5,490,000 adjusted for inflation) per individual.
- The federal estate tax rate remains 40% for those who exceed the lifetime exclusion amount.
Wishing you all the best for a happy and healthy 2018!