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How New Tax Law Affects Estate Planning & Gift Tax

New Tax Law Attorney Grand Rapids

Starting January 1, 2018, the Tax Cuts and Jobs Act increased federal estate and gift tax exemptions to approximately $11 million. While the exemptions sunset on January 1, 2026, you can still benefit by making gifts up to $11 million while you are alive. Married couples will be able to give away up to $22 million. Since Congress could repeal this tax law, it’s important to schedule an appointment with your estate attorney to go over your plan. Keep reading to learn how the new tax law could affect your estate planning.

How does the gift tax work?

Gifts are defined as either cash or assets you give away.  Once you have gifted over approximately $11 million during your lifetime, you will be responsible for paying the gift tax. Married couples will be able to gift up to approximately $22 million during the course of their lifetimes. While most people will never have to worry about owing a gift tax, you’ll want to consult with your estate planning attorney if you have a large estate. An elder law attorney will be able to help you determine the best strategies for asset protection.

How has the gift tax changed from 2017?

In 2017, you were only able to gift approximately $5 million in assets (about $10 million for married couples) before you had to pay the gift tax. This lifetime gift tax limit has doubled for 2018 and will sunset on January 1, 2026. The exemption from the federal gift tax will be adjusted annually for inflation. The gift tax rate remains at 40% for gifts over the exemption.

The gift tax exclusion amount increased to $15,000 per person, per year. This means that if your son needs $12,000 to put down on a house, you can gift this amount without being responsible for gift tax. However, if you were to gift $20,000 to your son in one year, you would be responsible for paying gift tax on the $5,000 that’s over the limit.

How has the estate tax changed from 2017?

In 2017, the estate tax exemption was approximately $5 million. Starting January 1, 2018, this lifetime limit was doubled to about $11 million. Married couples have an estate tax exemption of approximately $22 million. The estate tax remains at 40% for assets over the exemption. However, keep in mind that the new estate tax exemption is set to expire on January 1, 2026. While the new estate tax law is in effect, it will be adjusted annually for inflation.

How does new tax law affect my estate planning?

Even if you plan on living long past 2026, you can still take advantage of the new tax law by giving away money up to the estate and gift tax exemptions while you’re still alive. By doing this, you’ll be able to avoid paying gift tax. Before changing or starting a gift program, you’ll want to schedule an appointment with your estate lawyer. Many states have their own estate tax laws that could affect how you and your lawyer plan for the future.

Who can help me with estate planning?

You’ll want to hire an attorney with experience in estate planning. An estate attorney is familiar with recent changes in law so you can create the best asset protection plan for your estate. We understand that your estate took you a lifetime to build, which is why it’s important to schedule an appointment with an estate planning attorney as soon as possible.

Our elder law attorneys at the Law Offices of Sean Patrick Cox are dedicated to helping you plan for a financially secure future. To schedule a free consultation with one of our Michigan estate planning attorneys, call our offices in Grand Rapids and Kalamazoo.