Thursday, March 15, 2018

President Trump and the Estate Tax

The Tax Cuts and Jobs Act of 2017 was signed into law by President Trump on December 22, 2017. Among many of the changes in the tax code which will have an impact on income and other taxes for individuals and businesses, the federal estate tax is also impacted. Many thought the federal estate tax was repealed as a result. While the federal estate tax remains in place, the exemption amount was greatly increased. Other benefits that were in place prior to the passing of the Act remain in place.

Beneficiaries of a decedent's estate continue to enjoy a step-up in basis on assets that pass to them upon death. Spouses also continue to enjoy a right of election of portability. In the case of a married decedent, an election is available under which any exemption amount that was not used by the decedent may be used by the decedent’s surviving spouse during the surviving spouses's life or at his or her death.

Prior to the Act, the federal estate tax exemption amount would have been $5.6m per individual for the year 2018. This amount is now doubled to $11.2m per individual. The exemption remains indexed for inflation for the forthcoming years. On January 1, 2026, the exemption will revert to the pre-Act amount indexed for inflation. The tax rate on taxable gifts and estates remain the same.

For New York State, the estate tax exclusion amount remains at $5.25m.