How the Tax Cuts and Jobs Act of 2017 Affects Estate Taxes

The federal estate and gift tax exemption allows individuals a specified value of lifetime gifts and assets to pass to their beneficiaries — estate tax-free. As of 2017, the federal exemption was $5,490,000. Under the new changes, the federal estate tax exemption has been temporarily doubled. As of January 1, 2018, the exemption is now $11,180,000. The increase only lasts until 2026 at which time the amount reverts back to 2017 amounts.

Beware though: just because the federal exemption has been increased it does not mean that you will not owe the estate taxes owed to the state that you reside in. There other options to help with state estate tax responsibilities in the shape of certain trusts.

A credit shelter trust can be a viable option for married couples with children who wish to ultimately pass assets to their beneficiaries (children) and also keep those funds available for their surviving spouse for their lifetime. The disclaimer offers flexibility to a surviving spouse under embedded provisions, which are usually contained in a will.

See David Frisch, How the Tax Cuts and Jobs Act of 2017 Affects Estate Taxes, Forbes, June 27, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.