By Sarah Stewart Legal Group
Most of us are aware that Congress passed a new tax bill for the 2017 tax year. The Tax Cuts and Jobs Act of 2017 will affect most of us come tax time. But, how will the new law affect your family’s wealth and estate plan?
We discuss 3 ways the act can affect your family’s planning below.
(1) Annual Gifting
The Federal government allows everyone a set amount of money they can gift, per person, each year without the gifts cutting into their estate tax exclusion. The new tax law still allows for annual gifting. However, the amount each person can gift each year increased from $14,000 to $15,000 per gift.
The gift exemption can become a little stickier for those needing long-term care. Keep in mind that those who receive Medicaid for long-term care may have these gifts counted against them for Medicaid qualification purposes. In Oklahoma, the look-back period is 5 years and any gifts made in the prior 5 years will have to be paid back to, or counted against the assets of, the person attempting to qualify for Medicaid.
(2) Inheritance and the Adjusted Basis
Another area of the law that stayed the same is the adjusted basis for those who inherit assets that have gained value during the deceased’s life. This rule allows heirs to avoid capital gains taxes on assets that have increased in value. The rule applies to estates of all sizes.
(3) Estate Taxes
The greatest change in the new tax law affects the estate tax, positively, for high-wealth families. The threshold for having to pay estate taxes has almost doubled with the new law from about $5.9 million per person before, to $11 million per person now.
For couples, the exemption amount is $22 million. The exemption applies to estates from December 31, 2017 to January 1, 2026.
For more information on how these, and other parts of the tax law, affect you and your family’s wealth plan, consult a professional.