So, you really want to know how the “Tax Cuts and Job Act” of 2017 affects the estate tax? Ok then, we’ll hit the highlights.
For those of you who plan on dying before midnight on December 31, 2025, the new tax law offers some certainty. For all others, well, the law expires then. The main thing the law does now is double your LIFETIME personal exemption from $5 million to $10 million, adjusted for inflation. For deaths in 2018, that means the personal exemption is approximately $11.2 million. ($22.4 million for married couples). On January 1, 2026, that exemption is reduced to $5.49 million.
“The law also increases the ANNUAL gift tax exclusion to $15,000. Last year it was $14,000.
“The law did not change the rules permitting stepped up basis at death. As a result, income tax planning has become a more important element of estate tax planning. The portability rules are unchanged.
“The key take-away is to keep abreast of changes in the law and keep your estate plan updated on a regular basis. This is the second MAJOR tax change in the last 5 years. New Congresses, new Presidents are likely to mean new estate tax laws. So, plan for now, but keep in mind that these laws never are truly “permanent.”