Estate Planning With an $11.18 Million Exemption

January 19, 2018

The tax law enacted on December 22, 2017 (the “Act”) effectively doubles, on a temporary basis, the Federal gift, estate and generation-skipping transfer (“GST”) tax exemptions – a significant modification to the transfer tax laws that will result in many clients making gifts over the next few years to take advantage of the increased exemptions and possibly modifying their estate plans.

 Effective January 1, 2018, the Federal gift, estate and GST tax exemptions increased from $5 million to $10 million, indexed for inflation from 2010. The inflation-adjusted exemptions for 2018, which have not yet been released, are expected to be approximately $11.18 million per individual or $22.36 million for a married couple (with the exemption to be adjusted for inflation for subsequent years). Under the Act, the increase is in effect through 2025, so that, unless the law is modified or extended, the exemptions will revert to 2017 levels (indexed for inflation) in 2026.

This alert highlights how the Act may impact clients, with a focus on:

  • Lifetime gift planning opportunities and considerations in light of the increased Federal exemptions;
  • Planning with existing trusts under the new law; and
  • How the Act may affect existing estate plans, particularly estate plans that include gifts of the Federal estate or GST tax exemption.