Legislation

Impact Of The Tax Law On Estate Planning

President Trump signed sweeping tax legislation into law on Dec. 22, 2017, resulting in several significant changes to the wealth transfer tax system, effective as of Jan. 1, 2018.

This Alert highlights the provisions of the new tax law that directly relate to estate planning and, more importantly, focuses on how the new law may impact you and your estate plan.

Estate Tax

  • The estate tax exemption amount is doubled. In 2018, each individual has an exemption from the federal estate tax of approximately $11,200,000, which will be adjusted annually for inflation. This increased exemption amount is effective Jan. 1, 2018, through Dec. 31, 2025 (at which time the exemption is slated to return to the 2017 amount).
  • The top federal estate tax rate remains at 40% on assets in excess of the exemption.
  • A deceased spouse’s unused exemption at death remains portable to his or her surviving spouse.
  • Stepped-up (-down) income tax basis under Section 1014 remains.
  • There is no repeal of the estate tax. As noted above, on Jan. 1, 2026, the federal estate tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

Gift Tax

  • The gift tax exemption amount is doubled. In 2018, each individual has an exemption from the federal gift tax of approximately $11,200,000, which will be adjusted annually for inflation.
  • The top federal gift tax rate remains at 40% for lifetime taxable transfers made in excess of the exemption.
  • The annual exclusion amount has increased to $15,000 (and will continue to be adjusted annually for inflation).
  • There is no repeal of the gift tax. On Jan. 1, 2026, the federal gift tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

Generation-Skipping Transfer (“GST”) Tax

  • The GST tax exemption amount is doubled. In 2018, each individual has an exemption from the federal GST tax of approximately $11,200,000, which will be adjusted annually for inflation.
  • The top federal GST tax rate remains at 40% on generation-skipping transfers of assets in excess of the exemption.
  • There is no repeal of the GST tax. On Jan. 1, 2026, the federal GST tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

How The New Tax Law May Affect Your Estate Planning:

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