Tax reform limits scope of estate tax

Bill Cass, CFP®, CPWA®

Bill Cass, CFP®, CPWA®, 02/20/18


As a result of recent tax reform, fewer estates will be subject to federal estate taxes.

The 2017 Tax Cuts and Jobs Act raised the lifetime exemption for the estate and gift tax to approximately $11.2 million for individuals — up from $5.6 million — and to roughly $22 million for married couples. According to estimates, only 1,000 estates in 2018 will exceed the exemption limit, compared with 5,000 prior to the new tax law.

Chris Hennessey discusses the new law and explains why estate planning is still important for investors.

Estate planning includes many key actions:

  • Preparing basic documents such as wills, health-care proxy, revocable trusts, power of attorney, and beneficiary updates
  • Asset protection
  • Advanced planning strategies such as decanting, spousal lifetime access trusts, or an incomplete non-grantor trust
  • Planning for low-cost-basis assets
There is also a role for estate planning experts to discuss identity theft protections.

Investors need to plan with the understanding that provisions for individuals under the tax law are slated to sunset at the end of 2025. After that date, unless the exemption is made permanent, the provision will expire and exemptions will revert to prior levels, including the federal estate tax. Meeting with a qualified estate planning professional is critical. Putnam’s investor education piece, "A closer look at the estate and gifting tax rules,” provides additional information about estate and gift taxes. For more detail on the tax law, read, “Understanding the Tax Cuts and Jobs Act.”

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