Estate Tax Exemption Doubles Under New Law

If you have a high-value estate, you can breathe easy about the federal government levying an onerous tax after you pass on. Congress passed, and the President signed into law, new tax legislation that will double the amount exempt from taxation by the federal government for estates and gifts. Prior to signing the new legislation, the amount exempt from taxation was roughly $5 million for an individual and $11 million for a married couple. Today, an individual enjoys a $10 million exemption (beginning in tax year 2018 and running through 2025) while a married couple’s estate is exempt up to $22.4 million. The estate tax exemption is also indexed for inflation which means individual will actually be able to enjoy an $11.2 million exemption from estate taxation.

In addition, a surviving spouse is able to receive their deceased spouse’s Unified Credit. This means that a married couple is going to be able to pass on $22.4 million to their children and other family members.

Temporary Tax Holiday?

It is important to note that the doubling of the estate tax exemption is not permanent and, if it is allowed to expire in 2025, the estate tax exemption reverts back to the $5 million base.

Who Will Be Impacted

The Joint Committee on Taxation estimated that the number of estates that will be subject to taxation under the new law will decline from five thousand under current law to less than two thousand under the new law, according to The number of estates exposed to potential federal taxation has declined sharply over the past two decades. For example, approximately 52,000 estates paid the estate tax in 2000. Why? Because the exemption was only $675,000 that year.

Gift Tax Exemption Increase

In addition to dramatically increasing the estate tax exemption, the annual amount that an individual can exempt from taxation via a gift will be $15,000 in 2018. That is a slight increase from $14,000 in 2017.

Basis Step-Up Remains

The step-up in tax cost where a decedent’s assets obtain a step-up in their tax cost to their fair market value when they pass on was not modified under the new tax law. With the step-up in tax cost retained and a much higher federal estate tax exemption, this means income tax planning becomes extremely important in estate planning and estate administration, according to Think Advisor.

Have Questions About How the New Tax Law Effects Your Estate Plan? Speak to a St. Charles Trust and Estate Planning Attorney Today

There are an array of modifications contained within the new tax law. As a result, you should consult with a St. Charles Trust and Estate Planning Lawyer so you can take advantage of the benefits of the increased estate tax exemptions via lifetime transfers and other strategies. The Polaris Law Group is ready and able to help. Polaris Law Group is comprised of experienced and skilled St. Charles trust and estate lawyers Scott Stork and Raymond Chandler. Schedule a meeting with Scott or Raymond today by phone or by filling out a quick contact form today.

Posts By Date