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Tax Reform and Estate Planning

David J. Barry

 

The Tax Cut and Jobs Act of 2017 (“TCJA”) is the most comprehensive change to the tax code since 1986. While the new law did not repeal the federal gift and estate tax, it did temporarily double the exemption. The result is that a lot fewer people will be subject to estate tax.

 

Beginning in tax years after December 31, 2017 and before January 1, 2026, the combined gift and estate tax exemption and the Generation Skipping Transfer (“GST”) tax exemption goes from $5 million (indexed for inflation) to $10 million (indexed for inflation) per person. For 2018, the exemption is expected to be $11.2 million. This means that a married couple can pass on $22.4 million tax free. The marginal rate for all three taxes remains at 40%.

 

It is important to remember that the increased exemption will sunset in 2026. Absent Congressional action, the exemption will revert to $5 million (indexed for inflation) for tax years after January 1, 2026.

 

There are ways to take advantage of the new tax law and lock-in savings as part of a comprehensive estate plan. Barry Law can assist in a discussion with you and your CPA regarding the best strategies for positioning your assets.

 

Reasons to Plan your Estate now.

 

Many people believe that Estate Planning is only for the super wealthy. Nothing is further from the truth. The most important reasons to plan your estate are not probate avoidance and minimization of taxes. Effective Estate Planning promotes family harmony and provides asset protection. A well-designed Estate Plan can provide protection for the surviving spouse and children from losing assets through remarriage, creditor claims, nursing home events and divorce.

 

Estate Planning is particularly important for parents with minor children. If something should happen to the parents there are two important considerations: (1) who will care for the children’s health and welfare; and, (2) who will manage the assets until the children are old enough to handle matters for themselves.