Question: How did the Tax Cuts and Jobs Act passed on December 22, 2017 affect federal estate, gift and generation-skipping transfer tax laws?
Answer: The Act doubled the federal estate, gift, and generation-skipping transfer tax exemptions through the end of 2025. Effective January 1, 2018, each individual has a federal exemption of $11.2 million, and married couples have a federal exemption of $22.4 million. These lifetime exemptions will be adjusted annually for inflation, beginning in 2019.
As of January 1, 2026, the estate tax laws are scheduled to revert to the pre-Act law (effectively cutting the exemptions in half). The value of a person’s estate that is in excess of his or her remaining applicable exemption will be subject to an estate tax at death at a flat 40 percent rate.
In addition to the higher exemptions, the annual amount that can be given tax-free to each of an unlimited number of persons under the annual exclusion has increased from $14,000 to $15,000 per year, under the inflation adjustment already applicable to those gifts.
Comment: The big take away here is more individuals and married couples will now have estates that are no longer subject to the federal estate tax, at least until 2025. Those individuals who have already utilized all of their federal gift tax exemption under the 2017 limits but who have sufficient wealth to continue to have taxable estates now or after 2025 may want to consider making additional taxable gifts to take advantage of the ‘temporary’ ability to make additional gifts free of federal estate and gift tax.
In addition to making gifts, other transfer tax mitigation techniques could be considered such as leveraging the use of GRATs and sales of assets to Grantor Trusts.
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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