Tax Cuts and Jobs Act Estate/Gift Tax Changes
By Shelley Thompson and Lauren Collins
On January 1, 2018, the Tax Cuts and Jobs Act (the “Jobs Act”) became effective, which made significant changes to the federal tax code. Significantly, for estate planning purposes, beginning with deaths occurring and gifts given after January 1, 2018, the Jobs Act doubled the estate, gift and generation skipping transfer (“GST”) tax exemption amounts. Thus, the amount one may gift to others during one’s lifetime and on death without incurring estate, gift or GST tax has increased as follows:
Prior to the Jobs Act, the estate and gift tax exemption amount was $5 million for individuals and $10 million for married couples (both adjusted for inflation). In 2018, however, after inflation adjustments, an individual may gift up to $11.2 million, increased from $5.49 million, and married couples may gift up to $22.4 million, increased from $10.89 million. Individuals or couples who may have previously maximized their lifetime gift tax exemption amount of $10.89 million may now gift an additional $11.4 million without it being subject to the roughly 40% gift/estate tax.
The annual exclusion amount for gifting continues to exist; it is $15,000 in 2018, per donor and per donee. This means, for example, a married couple may gift up to $60,000 to their daughter and son-in-law in 2018 ($15,000 per spouse per donee), without reporting the gift on a gift-tax return – the vehicle used by the IRS to keep track of gifting to be sure that couple doesn’t exceed their lifetime estate/gift tax exemption amount (now $22 million per couple). The annual exclusion amounts do not count toward the total. Also consistent with the old law, there remains a “portability” provision which allows spouses to use each other’s unused estate/gift exemption amount by checking a box on the Form 706 estate tax return of the first spouse to die. In sum, in addition to annual exclusion amounts, couples can now pass on during their lifetime and on death a total of at least $22 million per couple, increasing with inflation.
The increases in the estate, gift and GST tax exemptions sunset on December 31, 2025, unless further legislation is enacted to extend or make permanent the changes.
If you would like to set an appointment to ask questions or review your estate plan, please contact Shelley Thompson at
303-796-2626 or sthompson@bfwlaw.com.
