While everyone is waiting to see what the results of President Trump’s tax reform plan will bring, we would like to remind taxpayers, particularly high net worth taxpayers, that a significant “Tax Cut” was implemented last year that will impact your 2017 estate and gift taxes.

In 2016, the IRS announced that for 2017, the estate and gift tax exemption limit is now $5.49 million per individual, up from $5.45 million in 2016. That means an individual can leave $5.49 million to his or her beneficiaries and pay no federal estate or gift tax. A married couple will now be able to shield just shy of $11 million ($10.98 million) from federal estate and gift taxes. The annual gift exclusion remains at $14,000 for 2017.

What Does the Threshold Increase Mean for Estate Planning?

All U.S. taxpayers are granted a certain amount of wealth that can be passed on to their heirs free of Estate or Gift Taxes. Even with the limits increased as of 2017, to $5.49 million for individuals or $10.98 million for married couples, the estates of many high income earners, often exceeds those exclusion amounts. In order to lessen the estate tax burden on their heirs, a common strategy has been to create various entities such as a grantor trust. With the increase in the limits, high net worth individuals will now have more money that can be transferred into such entities to stay below the taxable threshold.

The ultimate fate of the estate tax remains to be seen. President Trump’s tax reform plan calls for a repeal of the tax, but for now, the raise in the exemption limits, mean a significant tax break for high net worth individuals, and their heirs.

How MBAF Can Help

We realize that estate planning for high net worth individuals is designed for the long term, and many of your strategies are already in place, and may, or may not, be impacted by the increase in the exemption amounts.

Still, we also realize that good estate planning strategies are designed to be flexible, and there may be options that the increased limits have created, that may open opportunities for you that you may not be aware of.

We can help you to evaluate your current estate and gift tax strategies in light of the updated exemptions, and your individual circumstances.

Compliance with and understanding the tax codes regarding valuation and estate planning can be complex. If you would like to benefit from our expertise in these areas, or if you have further questions on this Advisory, do not hesitate to contact our Tax and Accounting Specialists, or call us at 1-800-239-1474.