By Kim Coogan
Federal Estate, Gift and Generation-Skipping Transfer Tax
The current federal gift and estate tax exclusion of $5,000,000, which, with indexing for inflation, has increased to its 2017 level of $5,490,000, is increased to $10,000,000, indexed for inflation from 2011. This would make it $11,200,000 in 2018. This means each person may transfer, either during lifetime via intervivos gifts, or upon death via testamentary bequests, a total of $11,200,000 to family, friends, or other intended “objects of their bounty.”
The GST tax exclusion, which allows a donor to transfer assets, either directly to beneficiaries who are two or more generations younger, or in trust in such a manner as to avoid the estate tax on wealth transfers from children to grandchildren, is likewise increased to $10,000,000, indexed for inflation, or to $11,200,000 in 2018.
The annual gift tax exclusion, which is $14,000 in 2017, is not affected by the new law, and will increase as expected to $15,000 in 2018. The unlimited marital deduction remains unchanged. The “portability” election, made on the first of married spouses’ deaths to preserve the deceased spouse’s unused exclusion amount, also remains unchanged. Charitable bequests are still deductions offsetting the estate tax.
When considering these new transfer tax provisions, there are three issues to remember:
∙ Those of us living in Illinois still have to be mindful of the Illinois estate tax on estates over $4,000,000 (first dollars over exemption amount are taxed at 28%).
∙ After 2025, the changes to the federal estate, gift and generation-skipping transfer tax law will revert back to $5,000,000, indexed for inflation.
∙ No tax law is permanent....
A few of the Income Tax Law Changes
Charitable income tax deductions remain unchanged, with an increase of the limit on the annual deduction from 50% of AGI to 60% of AGI.
The Qualified Charitable Rollover, whereby a taxpayer may roll his or her IRA annual required minimum distributions up to $100,000 directly to a charitable organization, remains available to taxpayers over the age of 70-1/2.