Settling Into a New Estate Tax Environment

Settling Into a New Estate Tax Environment

By Margaret Menicucci, Attorney & Counselor

In my November 2nd blog, I reflected on the status of gift and estate taxation with the tax reform act looming in the background. The Tax Cuts and Jobs Act became law in late December. Lawyers, accountants, and financial planners are all developing an understanding of how these changes affect our clients. At Braun & Gresham, we know that our clients are concerned about leaving a legacy, protecting their valuable land, and protecting their loved ones. Tax planning is an important component of estate planning because it helps preserve your estate, but in the current tax environment, paying estate taxes will not be a concern for most families given the sizable estate tax credit provided under the new law.

Some key changes in the estate tax law for 2018 are:

• For gifts made to anyone other than your spouse (e.g. children, siblings, friends), the federal gift and estate tax credit (called the Unified Credit) is now approximately $11,200,000 per person. Married couples have a credit of approximately $22,400,000. Because this credit is adjusted for inflation, we are still waiting on IRS to publish the exact value of the credit and you can expect moderate increases in this credit in the future. This credit applies to gifts made during your lifetime and gifts of your assets upon death. This substantial increase to the Unified Credit expires after the year 2025.

• The 2018 tax rate on the part of an estate that exceeds $11,200,000 for a single person and $22,400,000 for a married couple is 40%.

• In 2018, the Annual Exclusion enables you to give as much as $15,000 to a person other than your spouse without using any of your Unified Credit. Because the Annual Exclusion belongs to the individual making the gift, a married couple can give up to $30,000.

When the Unified Credit first increased to $5,000,000 per person in 2012, we began to sharpen our focus on helping clients balance the avoidance of estate taxes against minimizing capital gains taxes for the recipients of gifts and bequests. With the increase in the Unified Credit, managing capital gains from a later sale of property will continue to be a component of good planning.

Thoughtful and up-to-date estate planning should remain a priority for individuals and families. Probate costs and conflict among family members can prove costly to an estate and toxic for family relationships. A clear plan using the right legal tools can relieve your heirs of that conflict.

Your estate plan should address:

• who takes care of your children if you are not there,
• who takes care of you if you become incapacitated,
• how you pass your estate in a wise and respectful manner to your children and grandchildren,
• how you ensure that your valuable assets, e.g. stock portfolio or the family ranch, are maintained for your family to use and enjoy, and
• what part of your estate goes to friends, community, and causes that you champion.

At Braun & Gresham, we help families and individuals achieve their estate planning and lifetime giving goals. Give us a call at 512-894-5426 to discuss your estate planning needs.

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