The 2017 Tax Cuts and Jobs Act brings major federal tax changes.
Important to us estate planning attorneys, the new law doubles the estate and gift tax exemption, from $5.49 million in 2017 to approximately $11.2 million in 2018. The new tax law maintains “portability” (which allows surviving spouses to use their deceased spouse’s unused exemption), meaning a married couple’s combined estate and gift tax exemption is now approximately $22.4 million. Just to be clear, that’s the amount a married couple can transfer, during life or at death, without paying any estate or gift taxes. The tax rate on anything over the exemption amount remains steady at a flat 40%.
The annual gift tax exemption has increased from $14,000 (where it has been for the past five years) to $15,000. This is due to inflation adjustments and not the new tax law. I explained how the annual gift tax exemption works in an interview last year (note, however, that since the interview was recorded before the new tax law it uses the old 2017 figures).
It’s also important to understand what the new tax law hasn’t changed. The new law keeps the step-up in basis at death, which is a huge tax boon to those who inherit appreciated assets.
Many folks have estate plans that were designed to avoid or delay estate taxes. Such plans may no longer be appropriate now that the estate and gift tax exemption is much higher. In fact, many tactics used to plan around the estate tax eliminate the step-up in basis at death, meaning those who in inherit have to pay higher capital gains taxes.
To learn more about these tax changes and how to protect your estate, contact our office for a no-obligation consultation. Contact us here or call 720-588-9830.