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It’s Time To Review Your Estate Plan!

Here are the facts. The Tax Cuts and Jobs Act increased the lifetime exemption amount for estates to $11.2M from $5.6M for individuals (i.e. married couples now have a combined $22.4M lifetime exemption available). The annual gift exclusion was increased for inflation from $14,000 to $15,000.

The estate tax (40%!) is still in place and this increase in the lifetime exemption is not permanent. The exemption amount is temporary and will “sunset” on 12/31/25, meaning that beginning 1/1/2026, the exemption amounts will revert back to the 2017 levels (adjusted for inflation). Sunsets are beautiful in Florida–not so much in the tax code.

This significant increase in the exemption for the next eight years presents individuals and families with a unique opportunity for estate planning. Now may be the most opportune time to take advantage of the increased gift tax exemption. There are several ways to do this, the most simple of which involves making gifts to either children and/or grandchildren outright or to new or existing trusts. There are also more complex strategies such as sales to grantor trusts.

It’s a necessary time to review your wills and revocable trust documents to ensure they still honor your wishes. Many wills and revocable trusts create trusts that are funded according to formula clauses tied to the exemption amount in effect on your date of death. This means if you die before 2026 (sorry, things got morbid fast), these trusts could be funded with SIGNIFICANTLY larger amounts than you were anticipating when you signed these agreements.

Oh, by the way, if you read this article and still think you do not have a Federal estate tax problem, there are still MANY states with an estate tax (New York, New Jersey, Pennsylvania, Illinois and Kentucky, just to name a few). And there are a multitude of non-tax reasons to have an estate plan as well.

If you have questions on your estate plan or want more information on how to take advantage of the new exemption amounts, please contact your GBQ tax advisor.

Written by:
Ryan Venable, CPA
Tax Senior

Contact
Contact
  • Scott Eichar
  • Senior Manager, Tax & Business Advisory Services
  • (614) 947-5233
  • seichar@gbq.com