Should You Revisit Your Estate Plan?



August 14 , 2018 | Posted by Whitney Hurtt |

Should You Revisit Your Estate Plan?

The Tax Cuts and Jobs Act (TCJA) increased the exemption amount for the individual estate, gift, and generation-skipping transfer (GST) tax exemptions to almost $11.2 million (double this for married couples). To put it more simply, individuals can pass assets to heirs up to $11.2 million during their lifetime or at death without triggering any federal estate or gift tax. While the TCJA did increase the exemption, it did not alter the top federal estate and gift tax rate which remains at 40%.

While this is great news for many, the increase in the exemption is temporary and will revert back to approximately $5 million (subject to inflation adjustments) for gifts made and decedents dying after December 31, 2025. This increased exemption will eliminate or greatly reduce the potential estate tax liability for many individuals that would have been subject to estate tax under prior law.  Having said that, it does not eliminate the need for thoughtful, proactive and individualized estate and gift planning, as a tactic that works well for one individual may not be advisable for another individual.

As a result of the exemption increase, below are a few planning ideas to consider:

  • If your will or trust funds a Bypass/Credit Shelter Trust, the increase in the exemption amount provides reason to review and, perhaps, amend those documents.
  • Due to the temporary nature of the exemption increase and the risk of a reduction by future legislation before December 31, 2025, individuals contemplating significant gifts may consider acting quickly.
  • The increased exemption creates an opportunity to take advantage of the lower income tax rates of certain family members by making gifts of income-producing property.
  • Choosing to hold assets until death, rather than making gifts today, may be advantageous. When an appreciated asset is inherited, rather than received as a gift, the recipient’s basis is “stepped up” to the asset’s fair market value on the date of death. This reduces the capital gains tax to the recipient when they sell the appreciated asset.

It is important to be proactive about estate planning. At Cassady Schiller, we can work with you and your estate planning attorney to ensure your plan considers both current and future estate and income tax implications to accomplish your desired outcome. If you have any questions about how these new rules impact you, please contact us as we welcome the opportunity to discuss your unique situation.