Texas residents may be aware that a new tax law was signed into law at the end of 2017 and how it may affects aspects of financial planning but they may not be aware they it can play a big role in estate planning. The tax reform legislation substantially raised the estate tax exemption over previous limits, and this can impact gifting and estate planning until 2025, when the law is set to expire, and afterwards as well.
The exemption was raised to $11.18 million per person, or $23.26 million per married couple. As a result, federal estate taxes on amounts gifted to heirs during one's lifetime or amounts left to heirs upon death under those limits have been eliminated. This means that federal estate tax now exists for none but the wealthiest individuals.
The generation skipping tax also increased to the same amounts for single and married couples and this law is also set to expire in 2025. The method that is used to calculate inflation in these areas has also changed from the consumer price index to the chained CPi. The new measure generally yields a lower rate of inflation.
What does this mean for Texas residents? This means they can now give away more of their estate without paying estate taxes. Lifetime gifts of estates can be made without worrying about taxes and can also be planned while keeping in mind the shifting levels of appreciation. While the law also benefits beneficiaries, it doesn't exclude the need for estate planning altogether.
When the law changes, it helps for everyone to take a close look at their estate planning documents and assess how they can take advantage of the opportunities being offered. It might help to get an experienced attorney to go over the documents every tax season so they can create strategies to simplify complicated estate planning.