How the New Tax Law Impacts Estate, Gift, And Generation-Skipping

Share on facebook
Share on google
Share on twitter
Share on linkedin
The new law doubles the federal estate, gift, and generation-skipping exemptions.

Unsplash David Hoffman 1(Originally posted 03/07/2018)

Among the significant changes in The Tax Cuts and Jobs Act that President Trump signed at the end of last year is that the new law doubles the federal estate, gift, and generation-skipping exemptions.

Effective January 1st of this year, each individual has a federal exemption of approximately $11.2 million. Married couples will have a combined federal exemption of about $22.4 million.

NOTE: The reason the totals are not exact is because they include an annual inflation adjustment indexed to an amount yet to be determined using the new chained consumer price index (CPI).

On January 1, 2026, the estate tax laws are scheduled to revert to the pre-Act amount which will be approximately half of what the exemption will be in 2025. However, Congress can extend the law or make the tax cuts and exemptions permanent.

A second change in the law is the amount that can be given tax-free to an unlimited number of persons has increased from $14,000 to $15,000 per year.

Additionally, the law continues a step-up in basis for a decedent’s assets for federal income tax purposes.

For those of you unfamiliar with the term “step-up basis” it describes the readjustment of the value of an appreciated asset to the higher value for tax purposes upon inheritance. That means, for example, let’s say a decedent leaves 100 shares of stock to his/her beneficiary. Now, let’s say, he/she bought the stock for $5.00 a share, but at the time of death, the stock is valued at $50.00 a share. Without the step-up, if the beneficiary sold the stock a year later for $60.00 a share, his/her capital gains would be calculated on $5,500.00, because the increased value was $55.00 per share. But, because of the step-up revaluation to the selling price at the time of the transfer, the increased value was just $10.00 per share; so, the beneficiary would pay capital gains on only $1,000.00.

With the doubling of the federal estate, gift, and generation-skipping transfer tax exemptions, taxpayers should review their current estate plans with their CPA or tax advisor to take advantage of the current higher exemptions that are now in place.

0/5 (0 Reviews)

If You Own a Business . . .

There could be substantial money in your pocket if you focus on your 2018 taxes today rather than waiting until the end of the year. 

Read More

Last Minute 2020 Tax Tactics

We’ve already seen a few areas where our clients need to act immediately to help reduce their tax liabilities.

Read More

Four Ways You Might Be a Bad Boss

About three out of every four employees are convinced they have experienced a bad boss.

Read More

10 Things You Were Taught NOT to Do as a Kid . . .

Reconsider fidgeting, daydreaming, talking to yourself, and 7 other activities your parents discouraged.

Read More

When the Corporate You Needs to Say No to the Personal You

One of the hardest things many small business owners and entrepreneurs need to overcome is the urge to “let the company pay for it.” Whatever the” it” is.

Read More
Share on facebook
Share on twitter
Share on linkedin

Leave a Comment

About Us

Since 1981, we bring measurable results to business owners who want to preserve wealth, boost operating capital, minimize their tax burden, and soar in today’s challenging business environment.

Recent Posts

Sign up for our Newsletter

Scroll to Top
%d bloggers like this: