The Estate Tax – Not Quite Gone

Beginning January 1 of this year, the federal estate and gift tax thresholds have essentially doubled. Under the new law the exemption amounts for both estate and gift taxes jump to $11,200,000 per individual and $22,400,000 per married couple.

For an unmarried individual, this means that his or her taxable lifetime gifts plus his or her “gross estate” at death (as “gross estate” is defined under the Internal Revenue Code) less applicable deductions, must equal $11,200,000, before any estate tax would be due. During that unmarried individual’s lifetime, he or she could give $11,200,000 of taxable gifts (that’s gifts that are exclusive of additional breaks such as the annual exclusion or the charitable deduction) before a gift tax would be due.
For a married couple that elects to take full advantage of the “marital deduction” and the portability of the “applicable credit,” this means that the couple’s total lifetime gifts, plus the value of the gross estate of the second to die, less applicable deductions would have to be $22,400,000 before an estate tax would have to be paid. Again, assuming full use of the marital deduction and portability provisions of the Code, this also means that a couple could make $22,400,000 in lifetime taxable gifts before needing to worry about gift taxes.
Also note that for 2018, the annual gift tax exclusion has increased to $15,000 (or ($30,000 per grantee for a married couple that splits gifts).

Now more than ever, we believe that the average person’s (even the average wealthy person’s) tax planning should be focused more on income taxes than estate taxes. The above described lifetime exclusions are slated to rise with inflation until January 1, 2026, when they will revert back to the current amounts adjusted for inflation.
– Rod Fluck

Posted in Finance / Taxes, Newsletters