Finance - HL 295 (1)

Helpful miscellaneous articles regarding our retirement plan and planning.  Like you, I review my retirement nestegg and plan from time to time.  Recently, I went though some continued education for some credentials I maintain and it occurred to me that we all could use a review about these issues.  So with your help, we will share and post articles and info that may be helpful and of interest to many of you in this section.

Old habits are sometimes very hard to break.  Some of us have been disciplined by years of tax rules that taught us to “gift” to our kids and gkids.  Well, the new tax laws changed the Estate Tax………..Big League!  Most of us will not have to worry about either gifting to avoid future taxes nor will we have to worry about estate tax in general.  Here below is an article that explains the changes to those used to gifting. 

Federal Gift and Estate Law in 2018 and Beyond

The federal estate tax affects only the richest families in America.

By Mary Randolph, J.D.

The federal estate tax affects only the richest families in America. The Tax Cuts and Jobs Act of 2017 doubled the threashold amount for paying federal taxes. This means that for deaths in 2018, only estates worth more than $11.2 million will owe estate taxes. And couples can share their exemptions--so between them, they can leave up to $22.4 million with no concern about estate taxes.

Exemption Amounts

In 2018, every person may leave or give away up to $11.2 million without owing any estate tax. As a practical matter, that means that under the new rules about 99.9% of all estates will NOT owe any federal gift/estate tax. The exemption amount will rise with inflation each year.

‘Portability’ for Spouses

One popular feature of the current estate tax law is that spouses can combine their estate tax exemptions, effectively letting married couples give away or leave almost $22.4 million without owing tax. The new law makes this feature, called “portability” by tax experts, permanent.
Here’s how it works: If the first spouse to die doesn’t use up his or her individual gift/estate tax exemption, the surviving spouse can use what’s left. That gives the couple a total exemption of twice the individual exemption amount. They can share that total exemption amount in the way that provides the greatest tax benefit. For example, if each member of a couple has $10 million in assets, and the first one to die leaves everything to the other, no estate tax is owed because property left to a spouse is tax-free. When the survivor dies and leaves $20 million ($10 million plus the $10 million inherited from the other spouse) to their children, no estate tax will be due, even though the estate is over the exemption amount, because the estate can use some of the first spouse’s unused exemption.
To take advantage of the portability rule, an estate tax return must be filed when the first spouse dies--even if no tax will be due. As commentators have pointed out, this means the IRS must process returns that don't provide any tax revenue, and taxpayers must pay experts to prepare these very complicated tax returns.

Gift and Estate Tax Rates

On very large estates subject to the tax, the gift/estate rate is now 40%, lower than the rates in almost every year since the 1930s.
This rate also applies to the generation-skipping transfer tax. That is a federal tax that is imposed on large transfers that skip a generation (for example, a gift from a grandparent to a grandchild) in an attempt to avoid estate tax.

 (As with any of these informative articles, anyone who needs someone to talk to about

this very subject contact me and I can direct you to a knowledgeable advisor).

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