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Estate Tax Exclusion Changes

On Behalf of | Feb 14, 2018 | News & Press Releases

The estate tax exclusion has doubled with the new federal tax law which was passed this December 2017.  A single person can now pass $11.2 million estate tax free. A married couple can pass a combined amount of $22.4 million with the proper provisions in the couple’s trust or utilizing the portability statutes and filing an estate tax return upon the death of the first spouse.

The Estate Tax Exclusion applies to gifts made during the lifetime. That is, any assets which were a gift during a person’s life will diminish the amount that can pass estate tax free at death, unless the amount of assets were less than the annual present gift exemption. The annual gift exemption in 2018 is $15,000.

The increased Estate Tax Exclusion is set to expire in 2025.  There is a good possibility that the increase will be extended past 2025. There is also a chance that the increase could be allowed to expire or that the exclusion amount could be decreased. Therefore, trust agreements should continue to have provisions which allow the optimization of the Estate Tax Exclusion.

The new federal exclusion does not change the need for a trust to avoid probate.  A trust is still very helpful to limit the expense related to administering the assets of a decedent, to avoid notice to family members who should be involved, or to avoid the need for court involvement when minors are receiving assets.  Corporate stock and LLC ownership should be held in a trust in order to ensure smooth business operations.