Because estate law is always changing, it’s important to stay on top of those changes and ensure that your family’s financial future is protected. For example, in 2017 the Tax Cuts and Jobs Act preserved the gift and estate tax exemption for the years spanning from 2018 to 2025. However, after new tax reform legislation was adopted just last year, a few additional items included in that exemption have now changed.
Of course, even these recent changes will “sunset” in 2025 without any further legislative action, so reviewing your unique situation with a skilled estate attorney is crucial to your family's financial future. Below, we've created a quick breakdown of what you need to know about the gift and estate tax exemption in 2019.
Changes to Estate Tax Exemption Eligibility
Last year, the Tax Cuts and Jobs Act significantly increased the number of people who could qualify for an estate tax exemption, boosting the cut-off to $11.2 million. Now that threshold has been raised again slightly to $11.4 million, which means that if you anticipate passing on assets valued at $11.4 million or under, you may be able to avoid estate taxes altogether.
Lifetime gifts have also seen a minor shift for 2019: Gifts at death and lifetime gifts must still be included in your $11.4 million exclusion (previously $11.2 million.) By giving small annual exclusion gifts to your loved ones, however, you may be able to reduce the size of your estate over time and ultimately save on taxes.
Marital Deductions and Surviving Spouses
Once your assets exceed $11.4 million, they will be taxed at a 40% rate – unless you have a surviving spouse. This is called the marital deduction, and it allows spouses who are full U.S. citizens to inherit your estate without paying taxes.
Under a concept called portability, surviving spouses can also pass on higher amounts to their families, but this is not an automatic process: Rather, it can only be accomplished by claiming unused exclusions from the federal tax return of the first spouse. With the 2019 adjustments, surviving spouses can now transfer up to $22.8 million tax-free in this manner, as opposed to the $22.4 million allowed under the 2018 rules.
Have more questions about the new limits in the Tax Cuts and Jobs Act? Call our attorneys at Pringle & Herigstad, P.C. today at (855) 245-5100!