New Estate Planning Guidelines


The nation’s leading estate planning conference, the Heckerling Institute on Estate Planning, was recently held in Orlando, Florida. The following are some items discussed that will be important going forward.

Tax Cut and Jobs Act of 2017

The basic estate and gift tax exclusion has doubled to $10 million (adjusted for inflation). The adjusted number for 2018 has not been released, but it is estimated to be approximately $11,180,000. The estate and gift tax exclusion reverts back to $5 million (adjusted for inflation) after 2025.

High-net-worth individuals should consider making gifts of the additional exemption amount now. Even if the original $5 million limit is reinstated after sunsetting and death occurs after 2025, future appreciation on the assets gifted would have already been removed from the taxable estate.

Testamentary Planning

Because the 2018 exclusion amount will be in excess of $11 million, estate taxes will only apply to about 1,800 decedents. There will be many individuals who, while not quite wealthy enough to have taxable estates, will have enough wealth to consider these planning strategies.

There are many planning options for these “middle-rich” individuals. Portability, the ability to move the federal estate tax exemption between married couples, is still available. When the first spouse dies, if the value of the estate does not require the use all of the deceased spouse’s federal exemption from estate taxes, the amount of the exemption that was not used for the deceased spouse’s estate may be transferred to the surviving spouse’s exemption. Thus, the surviving spouse can use the deceased spouse’s unused exemption, plus his or her own exemption for gifting.

For married couples with estates under $5 million, trust planning will still be appropriate because of creditor protection and protection against their children’s spouses. Married couples with estates of $5 to $11 million may want to use some of the additional exempt amount before it sunsets and may also want to consider portability. Individuals and married couples with more than $11 million will also want to consider gifting.

Basis Planning

Because so few estates will be subject to the estate tax, income-tax-basis planning becomes even more important at the time each spouse dies and especially at the second spouse’s death. Taxpayers should consider strategies to maximize and concentrate basis in assets where it can be of most benefit.

If you have questions or would like more information, please contact Donita Joseph at djoseph@windes.com or 844.4WINDES.

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