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New Tax Law Affects Estate Planning


The new tax law that was signed into effect represents one of the most significant changes to the tax code over the last 30 years, and has an impact on estate planning. Among its many changes, the law doubles the estate, generation-skipping, and gift transfer (GST) exemptions. We discuss this in greater detail below.

What Changed?

One of the changes involves the maximum amount that a donor can give to someone else without any gift tax consequences (otherwise known as the “annual gift tax exclusion”). This increased from $14,000 to $15,000 per individual (or $30,000 per couple) per year.

The law increases estate, lifetime gift, and GST tax exemptions temporarily through 2025. It increases it from a base of $5 million to $10 million, which, for 2018 (and taking into account inflation), means that the exemption is $11,180,000 per individual, or $22,360,000 for a married couple. At the end of 2025, the exemptions revert to the current law, with a base of $5 million. This change creates a need to immediately review your estate planning documents with your attorney.

The law also created a new income tax deduction for business owners of pass-through entities of up to 20 percent of Qualified Business Income. However, it comes with certain requirements and definitions, including:

  • Business must be a pass through entity, such as a limited liability company, partnership, S corporation, and/or sole proprietor.
  • Qualified Business Income is the net income from the business after the deduction of business expenses from business income.
  • The taxpayer is allowed the entire 20 percent deduction if their income is below $157,500 per individual and $315,000 per married couple filing jointly. If their income exceeds this limit, the deduction is phased out.

In addition, 529 Plans can now be used to pay expenses at private, public, or religious elementary and secondary schools, in addition to colleges and universities. However, the distributions to these extra institutions are limited to $10,000 per beneficiary, per year.

And while a child’s unearned income was previously taxed based on the parent’s income tax bracket, the law now taxes any income in excess of $2,100 at the estate and trust tax rates, which are often higher.

What Did Not Change?

The “portability” rules stayed the same, allowing a surviving spouse or their estate to make use of any unused estate and gift tax exemption remaining from the estate of the first spouse to die. The top marginal tax rate for the federal estate, gift, and GST tax were also not adjusted by the law, and remain at 40 percent.

Contact Our Florida Estate Planning Attorneys for Assistance

If you live in Florida and have questions about how the new tax law impacts your estate planning, contact one of the experienced Sarasota estate planning attorneys at Suncoast Civil Law for a consultation.