Why estate planning is essential, even with the tax law changes

| Jan 1, 2018 | Wills, Trusts, And Estate Planning

The president was unable to make good on his promise of eliminating federal estate taxes this past year. However, the final version of the tax reform bill he signed into law just before the holidays does help those with substantial estates protect more of their money from Uncle Sam.

Under the revised tax code, individual Americans can exclude up to $10 million of an estate from annual estate taxes as well as taxes on gifts and on trusts that are set up to skip a generation. That’s double the $5 million limit set earlier in the decade ($5.6 million with the inflation index.) Couples can now exclude up to $20 million. Since these taxes are governed by an inflation index, the individual estate exemption is now actually $11.2 million, and the maximum for couples is twice that.

The congressional Joint Committee on Taxation estimates that with the change to the law, the number of estates subject to these taxes in 2018 will drop to 1,800 from 5,000.

It’s essential to understand, however, that the change “sunsets” in 2025. That means that if current or future members of Congress don’t take any action to extend the change before then, the exemption limit will revert to the amount before the reform bill was passed.

As one Washington, D.C., estate planning attorney notes, anyone “who can afford to do so will want to use their exemption for gifts, in case it actually does sunset.” She says, “It’s better to give now while the law is certain.”

Maryland, as many of our readers know, has its own estate tax that’s assessed in addition to the federal tax. The exemption for this tax will be increased to match the federal one beginning this year.

Even if an estate valued at $10 million-plus seems unfathomable, sound estate planning guidance is always wise. It can help your heirs and beneficiaries keep more of the assets that you and perhaps previous generations of your family have worked hard for.

Source: Forbes, “Final Tax Bill Includes Huge Estate Tax Win For The Rich: The $22.4 Million Exemption,” Ashlea Ebeling, Dec. 21, 2017

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