Federal Estate and Gift Tax Reform
Two key changes to the federal estate, gift and generation-skipping transfer tax provisions were made when Congress passed the most sweeping tax reform of the past three decades:
- The new law doubles the existing estate, gift and generation-skipping transfer tax exemptions, as indexed for inflation. On March 5, 2018, the IRS released Bulletin No. 2018-10 announcing in 2018 these amounts will be $11,180,000 per person ($22,360,000 per married couple).
- The increased exemptions will “sunset” at the end of 2025, which means the new increased exemption amount would be revoked without further legislative action and the exemption will revert back to its current level ($5,600,000, indexed for inflation). For those with estates in excess of this amount, proactive gifting strategies ought to be considered before the sunset occurs.
The Joint Committee on Taxation, a congressional committee charged with estimating the impact of fiscal legislation, estimates that 1,800 estates will pay the estate tax in 2018, a steep drop from the approximately 5,000 estates it says would have had to pay it without the new tax law. This well may reduce the incentive for wealthy Americans to bequeath money to charity, sparking a roughly $7 billion annual decline in giving through charitable bequests.