Tax Reform Comes with Changes to Estate, Gift Taxes
The major changes to the tax code brought about by the Tax Cuts and Jobs Act of 2017 will have a significant impact on how people with a high net worth will plan their estates.
Under the new law, the estate tax exemption is doubled to approximately $11.2 million for individuals and $22.4 million for married couples. The law also doubles the generation-skipping tax exemption in 2018 to $11.2 million for individuals and $22.4 million for married couples. Both of these exemption figures will be adjusted for inflation each year.
The changes will end after 2025 (unless new laws extend them) and in 2026 will revert to inflation-adjusted amounts closer to what had been set in recent years.
Effects on estate plans
For people who had been hovering right around the exemption limit under the old system, the changes provide them with a lot more room to get their estate under the new limits. Those who previously did not have a realistic ability to bring their estate value below the exemption limit now have a lot more estate value that will be free from taxation.
However, some more complicated updates to your estate plan might be necessary, depending on the steps you have already taken. Many people use wills or revocable trusts that establish a trust of the amount of property that would be exempt from estate taxes upon the creator’s death. This amount is often determined via a formula based on tax laws rather than exact amounts.
If your estate planning documents refer to tax law, it is important to ensure they take into account the new Tax Cuts and Jobs Act so that you can be sure you’re getting the outcomes you expect.
For more information and guidance on how to plan your estate in accordance with the Tax Cuts and Jobs Act, contact an experienced Florida estate planning attorney with BaumannKangas Estate Law.