The Tax Cuts and Jobs Act of 2017, referred to as TCJA, became effective January 1, 2018, enacted by the Pennsylvania government. This act changes several aspects of federal tax law that have a significant effect on estate planning. We will go over the topics broadly but detailed enough to demonstrate the consequences and the need to meet with your wills and trusts attorney in order to update your estate planning document.
Increase in The Federal Estate and Gift Tax Shelter Amount
This is a temporary increase in the Federal Estate and Gift Tax shelter amount from 5.6 million originally in 2018 to 11.2 per individual (22.4 million per couple) per the TCJA as of January 1, 2018. This essentially doubles the amount of lifetime gifts and death time transfers starting in 2018. These amounts are expected to continue until December 31, 2025.
On January 1, 2026, the shelter amount will then decrease again to 5.6 million, allowing possibly for inflation. Many wills and trusts attorneys, as well as lawmakers, are not convinced this tax shelter amount will survive until 2026. The expectation is that the shelter amount will decrease to 5.6 million per person long before the current projected timeframe. Wills and trusts attorneys are encouraging clients to take advantage of this current additional shelter amount this year, as the shelter amount is guaranteed through the end of the year.
The projected timing of this law is unknown at this time by estate planning attorneys, Pennsylvania lawmakers, and wills and trusts attorneys. Right now wills and trusts attorney’s client have a limited time to transfer significant gifts to children and grandchildren.
Simplify Wills and Trusts Between Married Couples
Originally estate plans were created with a credit shelter trust for the surviving spouse. This was in order to reduce federal estate taxes. However, now that the shelter amount has risen, the need for credit shelter trusts is no longer. This provides the perfect time for married couples to contact their wills and trusts attorney to update their wills and/or estate plans.
The Federal Gift Tax Annual Exclusion Increase
In prior years an individual could gift up to $14,000 tax-free, $28,000 per couple. However, the amount for 2018 has been increased to $15,000. Planning your estate gift giving with your wills and trusts attorney can help you create a plan of gifting to children and grandchildren a significant amount completely tax-free. Being able to properly plan ensures you are minimizing your overall estate tax debt and ensuring your loved ones are provided for even after one’s passing.
Reevaluate Your Estate Plan
Due to many new estate laws and tax laws, which work hand in hand with each other, it is essential to meet with a knowledge wills and trusts attorney. They will be able to confidently walk you through a thorough plan in order to minimize your estate tax through proper estate planning, and help you schedule and properly put in place gifting assets either tax-free or with minimal tax consequences. This way you are protecting your assets and ensuring your loved ones are protected.
NOTE: This is for informational purposes only and does not constitute legal advice.
Call us for more information from Kim A. Bodnar, Attorney at Law or to schedule a consultation in our office in Pittsburgh.