2017 has been a big year for the estate planning world. There have been several changes in taxation policies that had a direct impact on this aspect of handling personal finances. A key player in this game, the Tax Cuts and Jobs Act of 2017, was signed into law on December 22, 2017. But speculations around it caused people to alter their estate plans or create new ones during this year.
What are the changes?
According to some lawmakers, estate taxes affect small business owners and individuals, compromising their business interests. This, in turn, reduces employment opportunities and has an impact on the economy. New regulations regarding estate transfers are designed to ease the burden on these small entities. Here’s a look at some changes made by this law:
- Doubling exemption – The new law doubles the exemption amount for estate transfer, generation-skipping, and gifting. This exemption is set at a base of $10 million for fiscal years 2018 to 2025, with inflation adjustments added each year. For 2018, the exemption amount is $11.2 million. Married couples have an exemption for amounts up to $22.4 million. This exemption was set at a base of $5 million for individuals in 2011 and a base of $10 million for married couples.
- Tax-cut rate – If a gift or estate transfer value exceeds the mentioned exceptions, individuals and businesses will have to pay 40% in tax. This tax rate hasn’t been changed so only estates that fall under the exemptions need to reconsider their estate planning.
The recent changes have affected how estate planning is carried out. Now legal experts have to plan for changes in regulation in 2025. Most recommend reducing taxable estate by gifting them. This will reduce tax burden when the exemption limit reverts back to $5 million in 2025. There are several other changes and provisions made in this bill. Both federal and state level planning underwent a massive change during 2017.
Estate planning is a personal responsibility. A good plan will ensure all your assets are distributed according to your wishes, all dues are paid, and your interests are protected if you’re unable to make decisions. An estate planning lawyer is aware of the latest legal requirements. They will make sure your plan complies with all regulations laid down by the government. They will also offer recommendations on how to reduce the tax burden, make sure all transfers are smooth, and your paperwork has no mistakes.
If you have any questions and want advice regarding estate planning, don’t hesitate to contact us at Jennifer W. Fowler.