The tax reform legislation signed by President Trump on December 22 last year included an important change for many wealthier families. As of January 1, 2018, the amount exempt from the federal estate and gift tax has doubled, to $10 million plus inflation adjustments since 2011 (so $11.2 million in 2018, still higher in the years ahead). That’s per person, so a married couple has $22.4 million worth of transfer tax shelter so far. Here are a few points to keep in mind about the new law:
No estate tax repeal. Earlier versions of this legislation included the complete repeal of federal estate and gift taxes in the future. That change was dropped along the way.
Temporary boost? The enlarged estate tax exemption expires in 2026, along with all of the individual tax changes, so as to meet projected budgetary targets. In the past, most such temporary tax breaks have been made permanent, and the amount exempt from federal estate tax never has been reduced. Still, the uncertainty casts a cloud over estate plans for the next several years. What’s more, some Democratic politicians are already on record as favoring a rollback of this provision, should the Republicans lose control of Congress.
Full basis step-up at death. For the vast majority of estates, planning for income and capital gains taxes will be more important than estate tax considerations. The new law preserves the adjustment of tax basis to fair market value for property received from a decedent’s estate.
Some state death taxes remain. There has been a trend since 2001of states abandoning their estate and/or inheritance taxes, when the federal credit for state death taxes was converted to a deduction. A majority of states have since dropped special taxes at death, but those that have kept them typically have exemptions well below what the federal government provides, some as low as $1 million. Anyone who lives in a state—or owns property in such a state—that still has any type of death tax will need to take that fact into account in estate planning.
I’m really proud of TCK’s team and how we’re working together to sort out the implications of this new law and how it may potentially apply to TCK’s clients.
THE TRUST COMPANY OF KANSAS ABIDES BY A SIMPLE PHILOSOPHY: MINIMIZE BURDEN, BESTOW FREEDOM.
As our longtime partners will tell you, we help our clients accomplish their goals, not our own. And we stay focused on the financial aspects of their lives so that they can stay focused on their priorities.
Our goal is to build a legacy by helping you protect yours. And we ensure that you meet your goals by closely monitoring your assets, so that you may continue enjoying a lifestyle to which you’ve become accustomed.
The officers at The Trust Company of Kansas are always willing to discuss your goals for your estate and help you to create a plan that is well-aligned with your wishes. If you have a specific question about beneficiary designation, please contact us at (800) 530-5254 or visit tckansas.com/contactus, and one of our Certified Trust and Financial Advisors will be happy to assist you.