Take Advantage of Significant Planning Opportunities...While They Last

President Trump signed into law new tax legislation that makes sweeping changes to the U.S. tax code. The new tax bill doubles the federal estate, gift and generation-skipping transfer tax exemption amounts, such that the lifetime exemption has now increased to $11.2 million per individual ($22.4 million per married couple). Notably, this doubling of the exemptions sunsets after 2025, when the exemptions will revert back to $5 million and will be indexed for inflation from a base year of 2016. The highest marginal federal estate and gift tax rates remain at 40%.

TAKE ADVANTAGE OF PLANNING OPPORTUNITIES

Individuals should strongly consider making gifts, either outright or in trust, in order to use this increased exemption amount before it expires in 2025. For residents of states with a state estate tax (such as New York), gifting during life using the exemption amount allows those funds to escape a state estate tax that could otherwise have been imposed at death.

REVIEW EXISTING ESTATE PLANS

Many wills and revocable trusts create trusts that are funded according to formula clauses based on the federal estate tax exemption amounts available at the client's death. If a client dies before 2026, these trusts may be funded with an amount that far exceeds what was originally anticipated. These clauses should be reviewed to ensure that they still effectuate the client's goals and wishes.

Furthermore, clients residing in New York and other estates which impose a state estate tax could owe significant state estate tax on the death of the first spouse if their estate planning documents fund trusts with the entire federal exemption amount. Accordingly, it is critical that these clients review the structure of their estate plans in light of the recent estate tax law changes.

TAKE ADVANTAGE OF INCREASED ANNUAL EXCLUSION AMOUNT

Each individual may give annually, to as many recipients as he or she desires, without the imposition of gift tax or the use of the individual's lifetime exemption, an amount equal to $15,000 per recipient (increased from $14,000 in 2017). Clients should consider making gifts to children and grandchildren (either outright or in trust) using their annual exclusion amounts.

CONSIDER EXPANDED USE OF 529 PLANS

The tax bill expands the use of Section 529 plans so that they can now also be used for tuition expenses for any public or private elementary or secondary school (instead of just college, as was previously allowed), up to $10,000 per year per beneficiary.

Please contact Lara M. Sass to take advantage of the unique planning opportunities currently available or to review your estate plans, in light of the new tax laws.