12/28/17

New Tax Law Affects Many Estate Plans

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The following article was featured in the December 2017 edition of Legacy, the Vorys newsletter focused on wealth planning.

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On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017 (referred to herein as TCJA or the Act).   Although the most discussed provisions of the Act concern income tax changes, the new tax law also contains provisions that directly or indirectly affect estate planning. 

The most important provision of the Act concerning estate planning essentially doubles the  exemption available from gift and estate tax for lifetime gifts and transfers at death from $5 million to $10 million.  After taking into account inflationary adjustments since 2011, the actual amount of the exemption is expected to be $11.2 million per person ($22.4 million per married couple), effective for transfers made and decedents dying after 2017. The generation-skipping transfer tax exemption also would be increased to $11.2 million per person ($22.4 million per married couple).

However, similar to the changes to the gift and estate tax exemption made in 2001, this change is not permanent.  Rather, it will “sunset” at the end of 2025, and the exemption will revert to $5 million (plus inflationary adjustments since 2011, which made the actual exemption $5.49 million in 2017 and $5.6 million in 2018). 

The new higher exemption level creates a number of opportunities and considerations:

Many of the other changes made in TCJA with respect to income taxes may affect planning, including:

Please contact your Vorys estate planning attorney if you have any questions regarding the impact of the proposed tax law changes on your family and estate plan.