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Just a Little Time Left for Year-End Tax and Estate Planning

“Over the past year, the opportunity provided by TCJA to transfer an unprecedented amount of wealth free of any federal gift, estate and generation-skipping transfer (GST) taxes has been brought into sharper focus.”


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As of Jan. 1, 2018, the amount an individual can transfer free of any federal gift, estate or GST exemptions were doubled to $11,180,000 for singles and $22,360,000 for married couples. Note that these figures contain annual inflationary increases and are projected to increase further, rising to $11,400,000 for singles and $22,800,000 for married couples in 2019.

On Jan. 1, 2026, all these levels will revert to 2017 levels. However, that should be more than enough time to make the most of this law. There is also no way to know what additional tax legislation will occur between now and 2026, so many are being advised to act sooner, rather than later.

Making use of the annual exclusion gift remains one of the simplest estate planning methods. This refers to the amount that any individual is permitted to give to any other individual, with no gift tax costs. Indexed for inflation, this amount is currently set at $15,000 and will likely stay at that level in 2019.  Remember that you can’t carry this over from one year to the next. Use it or lose it.

Married couples are permitted to combine this annual exclusion, when making gifts to their adult children. Therefore, they are allowed to be extremely generous, giving a gift of $30,000 per year to an adult child, without using any of their transfer tax exemptions. There may be exceptions, so check with your estate planning attorney before making any large gifts.

Another way to maximize the use of gifts, is by covering costs of tuition or medical care. Individuals can make unlimited gifts on behalf of others, by paying tuition directly to the recipient’s school, or by paying their medical expenses directly to the health care provider. This also applies to paying health insurance premiums.

The most common planning opportunity under TCJA, is to make full use of the new exemptions. Unless assets decline in value, lifetime gifts utilizing the exemption amounts will almost always result in overall transfer tax savings. All income and future appreciation that resulted from the gifted assets escape future gift and estate taxation. These exemptions are at historically high levels and could have an exponential impact on a gifting strategy.

There’s no reason to put off addressing traditional estate planning, especially in light of this generous law. Revisions may need to be made to maximize these new exemption levels. A review of your estate plan is also needed, if families have undergone any major changes, including birth, death, divorce, marriage, etc., to ensure that the documents and the plan still reflect your wishes.

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