The Tax Cuts and Jobs Act, signed into law on Dec. 22, includes significant changes to the federal gift, estate and generation-skipping transfer (GST) tax laws.
by Ann F. Schrooten, Estate Planning Attorney, Fitzgibbons Law Offices
Each U.S. citizen or resident is allowed a lifetime exclusion amount that may be used to shelter from gift and estate taxes transfers of cash or other assets during life or at death.
Effective Jan. 1, 2018, the combined gift and estate tax exemption and the GST tax exemption amounts double from an inflation-adjusted $5 million to $10 million. For 2018, the exemption amounts are expected to increase to $11.2 million per individual or $22.4 million for a married couple. The increases are scheduled to be in effect through Dec/ 31, 2025, after which the amounts will revert to pre-2018 levels ($5.6 million per person, adjusted for inflation).
Unrelated to the Tax Cuts and Jobs Act, the gift tax annual exclusion has increased to $15,000 per donee (or $30,000 for a married couple). That change is also effective Jan. 1, 2018.
The new tax law also permanently expands the benefits of Section 529 college savings plans, which allow tax-free accumulation of education savings. Under prior law, funds in these plans could be distributed income-tax-free for qualified higher education expenses. The new law allows distributions to be made on the same basis to elementary or secondary schools as well, subject to a limit of $10,000 per plan-beneficiary per-year.
The impact of the changes made to the estate, gift and GST taxes will depend on the circumstances of an individual or couple. For some, the changes will provide considerable planning opportunities to make gifts or other transfers to take advantage of the increased amounts while they are available.
Although fewer individuals will have to worry about estate tax liability, the changes under the new tax law do not spell the end of estate planning as we know it. Non-tax issues that your estate plan should still take into account include management and distribution of assets upon death or incapacity, guardianship of minor children, family business succession and planning for a loved one with special needs.
Ann Schrooten is an estate planning attorney at the Fitzgibbons Law Offices in Casa Grande. You may reach her at firstname.lastname@example.org or 520-426-3824.