Impact on Gift, Estate, and GST Taxes Under the Tax Cuts and Jobs Act (H.R. 1)
The tax law known as the Tax Cuts and Jobs Act (H.R. 1), signed by President Trump on December 22, 2017, contains important changes to provisions governing gift, estate, and generation-skipping transfer (GST) taxes:
- Effective January 1, 2018, the amount exempt from gift, estate, and GST taxes will temporarily increase to $10 million per person. This amount is indexed for inflation. It appears that in 2018 the exemption from gift, estate, and GST taxes will be just under $11.2 million for an individual and just under $22.4 million for a married couple. Prior to the increase, the exemptions were $5,490,000 per individual and $10,980,000 per married couple.
- Absent further Congressional action, the increased exemption from gift, estate, and GST taxes will expire on December 31, 2025.
- The annual gift tax exclusion amount ($14,000 for 2017 and $15,000 for 2018 for single donors, and double those amounts for married donors) remains unchanged. The annual exclusion amount will continue to be indexed for inflation.
- Tax basis rules will continue as before. Inherited property will receive a stepped-up tax basis. Gifted property (in most cases) will retain the donor’s tax basis with no step-up.
The Tax Cuts and Jobs Act's increased tax exemptions provide new opportunities for gift and estate planning. Taking full advantage of these opportunities will require careful review, including close attention to the impact of possible future expiration of the increased exemptions. The Act also may require some individuals to update their current estate planning documents to ensure that they are not giving "too little" or "too much" to their beneficiaries. Please contact a member of our Private Client Services Group if you wish to discuss potential opportunities and/or to update your current planning documents.
Attorneys in the Group monitor and respond promptly to changing tax laws and regulations, and advise individuals and groups on sophisticated tax, gift, and estate planning matters.
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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.