At the end of 2017, Congress passed a major tax bill known as the Tax Cuts and Jobs Act (TCJA). This new act doesn’t just impact business and income taxes, but also affects your estate planning. Under the TCJA, there is a limited opportunity to transfer an unprecedented amount of wealth free of:
- Federal gift taxes
- Estate taxes
- Generation-skipping transfer (GST) taxes
What Are the New Exemption Levels
As of January 1, 2018, federal gift, estate, and GST exemptions have been doubled to:
- $11,180,000 for a single person
- $22,360,000 for a married couple
The amounts listed above contain annual inflationary increases as well. It is important to note that TCJA provisions related to federal gift, estate, and GST exemptions will revert back to the 2017 level on January 1, 2026. The exemptions for 2017 include:
- $5,490,000 for a single person
- $10,980,000 for a married couple
Although the law might undergo significant changes between now and January 1, 2026, you will need to enact planning strategies ahead of the reversion date if you want to take advantage of these new tax laws. By quickly implementing a strategy for your estate plan, you can shift out more future appreciation from your estate. Since exemptions are at historically high levels, assets that will rapidly appreciate will have a substantial impact on any gifting strategy.
Use Trusts for Gifting
As with all gifting strategies, assets can be gifted outright so that they are under full control of the beneficiary. However, this also exposes the beneficiary to potential creditors. An alternative to this issue is to use a trust. Trusts provide the following benefits:
- Protects the gifted assets from the beneficiary's creditors. This also includes divorced spouses of beneficiaries.
- Determines the future use and control of the gifted assets.
- Shelters the gifted assets from future gift, estate, and GST taxes by allocating your GST exemption.
With a trust, you also have flexibility when determining who will be responsible for paying income taxes that have been attributed to the assets in a trust.
Review Estate Plans
In light of these new tax changes, all of your existing estate plans and titles of assets should be reviewed and updated. Many estate plans contain tax-related terms and formulas that are related to federal estate tax laws. Because the exemption levels have been significantly expanded under the TCJA, many estate plans will now be outdated or might result in unintended consequences. Now is as good of a time as any to review the title of your assets and all of your beneficiary designations.
Even if you aren’t sure whether the new exemption levels will benefit you, it is still a good idea to make sure your plan suits the goals you have for your estate. Important things to consider when reviewing your estate plan include:
- Charitable planning
- Planning for probate
- Business succession planning
- Planning for incapacity
- Advance health care directives
- Special needs planning
- Planning for minor children & designating guardians
Get Help From Our Estate Planning Attorney
At J. Roland Jeter, P.C., we offer a wide range of estate planning services that can help you protect your assets and last wishes. For more than 35 years, attorney Roland Jeter has been helping clients in Irving and surrounding communities with their estate planning needs. Let us get to work for you today.
To schedule a free 30-minute consultation, call our attorney at (972) 330-4050.