TAX LAW CHANGES CAN ALTER ESTATE PLANNING STRATEGIES
Many people in California and across the country may be wondering about how they can benefit from the estate planning implications to changes made in federal tax law by the Tax Cuts and Jobs Act passed by Congress in December 2017. Provisions in the new law double the exemption provided for estate, gift and generation-skipping transfer taxes, which reflects the intensification of an ongoing trend in federal law to reduce estate taxes and other costs associated with wealth transfer after death. The law went into effect on Jan. 1, 2018, and the exemption for a single person rose to $11,180,000 and for a married couple to $22,360,000. These amounts are slated for a further annual increase every year in line with inflation.
While the doubled exemptions will be in place for the next eight years, they are scheduled to sunset in 2026. At that time, the exemption will return to its 2017 level, also adjusted for inflation. Therefore, it is important for people who want to maximize the benefits of these changes to implement their estate planning program before the sunset date specified. Making use of these exemptions early on can help protect assets from future taxation in case of other changes.
Gifting can be a particularly important component of an estate planning strategy that seeks to minimize transfer taxes. The use of trusts for gifting may help to serve several goals, including putting a structure in place to direct future use of the assets and protect them from beneficiaries' creditors.
People who want to make the most of estate planning in light of these changes may wish to work with an estate planning attorney. A lawyer may provide a thorough review of wills, trusts and other documents to help clients achieve their goals.