Wow! The tax law has passed Congress and is awaiting the signature of the President.
Here is what happened with respect to the estate tax:
- First and foremost, the effort to repeal the federal estate tax failed.
- Second, for the next 8 years, until 12/31/2025, the estate, gift and GST tax exemption doubles to about $11 million per person (or $22 million for a married couple). On January 1, 2026, the exemption is cut in half.
So, what should you do now?
- If your assets are greater than $11 million per person (or $22 million for a married couple), consider using the entire exemption for estate, gift and GST tax during the next 8 years, this may be a “use it or lose it” situation. Also, the political winds in Congress change before 12/31/2025, the estate, gift and GST tax exemption may also change. Therefore consider “estate freeze” techniques, such as GRATs, Irrevocable Trusts, Defective Grantor Trusts, etc.
- Unless you are sure you are going to die prior to 12/31/2025, still plan as if the estate, gift and GST tax exemption were at the current $5.5 million level, with a 40% estate tax on anything above the exemption amount.
- Review and revise your current estate plan to check to make sure the provisions of your estate documents are still consistent with your family situation given the new temporary increase to the estate, gift and GST tax exemption and to make sure that your assets will pass to your desired beneficiaries in the most advantageous manner, such as to protect the inheritance from your beneficiaries’ lawsuits, creditors, nursing home costs, divorces and second marriages.
More info to come!