The New Tax Law Provides Estate Planning Opportunities

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January 22, 2018

Shortly before Christmas, Congress approved and President Trump signed into law the Tax Cut and Jobs Act.  The new law increases the federal estate, gift, and generation-skipping transfer tax exemptions from $5 million to $10 million, adjusted for inflation.  The inflation-adjusted exemption amount for 2018 has not yet been released by the IRS, but commentators are predicting the amount will be $11.2 million.  With proper planning, married couples may combine their exemptions, resulting in a collective $22.4 million of assets that may transfer free of federal estate, gift, and generation-skipping transfer tax.

The new law is effective starting in 2018.  However, the new law is not permanent; its provisions expire after 2025.  Absent further Congressional action, the federal estate, gift, and generation-skipping transfer tax exemptions will revert back to $5 million, adjusted for inflation, when the law sunsets at the end of 2025.  Accordingly, the new law provides a window of opportunity for wealthy individuals and couples to utilize the doubled exemption amount between 2018 and 2025.

Consider capitalizing on the doubled exemption amount by:

Making lifetime gifts up to $11.2 million per individual, or $22.4 million per married couple.  The best vehicle for these gifts is an irrevocable creditor-protected trust that incorporates generation-skipping transfer tax provisions, sheltering the assets from creditor claims and transfer taxes for future generations of your family to the greatest extent possible.

Simplifying your existing estate planning documents.  The lower exemption amount necessitated complex planning to minimize or eliminate the estate tax.  Given the doubled exemption amount, these complex provisions of your existing estate planning documents may be simplified, while still incorporating flexibility to manage the future reversion to the lower exemption amount in 2025.

Contact any attorney in Ruder Ware’s Trusts & Estates Practice Group to discuss how you can take advantage of the new law.

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