Estate Tax Alert: Tax Bill Opens Door to New Options

President Trump just signed the GOP tax bill this morning, which Congress passed on Dec. 20. Officially numbered H.R. 1, and awkwardly dubbed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” the legislation includes some good news for high-net-worth families seeking to protect and pass along more of their assets tax-free.

The bill essentially doubles the lifetime estate tax exemption, bringing the amount an individual can leave or gift to children or heirs without federal gift or estate taxation to over $11.2 million for an individual and $22.4 million for a couple, thanks to inflation indexing. (Depending on where one lives, however, state estate taxes may still be a factor.)

Timing is key. For those fortunate enough to benefit from these enhanced exemptions, the biggest question is whether or not to take advantage of gifting now. Estate taxation rates are not permanent, regardless of how they are pitched.

This higher exemption applies to tax years 2018 through 2025, but a new administration or Congress is always free to change or eliminate the rate. So, anyone with an estate worth more than $11.2 million — or otherwise more than they need (a difficult call) — should seriously consider the options that are now open to them.

Consulting directly with your tax professional and legal team will help determine what that might mean for you and your family. During these consultations, we recommend talking over questions such as whether and when to make gifts or sales to various types of trusts, how to make gifts go farther, how to fine tune your charitable commitments for maximum win-win to you and the receiving entity, and related issues.

Of course, Jason Smolen and Dan Ruttenberg here at SmolenPlevy are available to assist you in navigating the opportunities and risks created by this latest tax legislation.