As a layperson, you have a lot of responsibilities on your plate on a day-to-day basis. It is unlikely that you are going to have a finger on the pulse of all the laws that relate to estate planning.
On the other hand, an attorney in the field will be up to date at all times. This is one of the many reasons why should develop a relationship with an estate planning lawyer. Since you are reading this, you are taking the first step, and we will share some information about an important matter in this post.
Estate Tax Exclusion
Financial success is a beautiful thing, and you have fewer worries when you are established financially. This is true in a general sense, but in one instance, the accumulation of resources can create a challenge.
There is a federal estate tax in the United States that can have significant impact on your legacy because it carries a 40 percent top rate. Your entire estate is not subject to the tax, because there is a credit or exclusion.
This is an amount that can be transferred tax free, and the remainder would potentially be vulnerable to taxation. In 2017, the exclusion was $5.49 million. A $5 million exclusion was established for 2011 via legislative mandate, and that figure was retained with adjustments for inflation.
The playing field changed dramatically in December of 2017. At that time, the Tax Cuts and Jobs Act was enacted. Among other things, it increased the exclusion to $11.18 million in 2018. That figure has been retained indexed for inflation annually, and this year it stands at $12.06 million.
Federal Gift Tax
You will logically consider lifetime gift giving to avoid the estate tax if it will apply to your estate. This was an option over 100 years ago when the estate tax was first enacted, but there’s been a gift tax in place continually since 1932.
The gift tax and the estate tax are unified, so the $12.06 million exclusion is a unified exclusion. It applies to your estate and large gifts that you give while you are living.
Sunset of Tax Cuts and Jobs Act
There is a window of opportunity for high-net-worth individuals that are exposed to the estate tax, but it is closing rapidly. This exclusion that we have right now is a record high, but it is going to be cut in half in 2026. At that time, the exclusion will go down to $5.49 million indexed for inflation.
In the meantime, you can use the higher exclusion to give tax-free gifts while you are living. Direct giving is a possibility, and you can also use the exclusion to fund certain types of trusts that provide transfer tax efficiency.
We can gain an understanding of your position and explain your options. Recommendations will be made, and when you decide to go forward, we can help you position your assets in a tax efficient manner.
Attend a Complimentary Seminar!
You can come away with some important information as you make a connection with our firm in person if you attend one of our seminars. These events are held at convenient locations in our service areas, and there is no admission charge.
We do ask that you register in advance so we can reserve your seat, and you can obtain more information and registration details if you visit our seminar schedule page.
Need Help Now?
If you have determined that you are ready to work with a Glastonbury, CT estate planning lawyer to put a plan in place, our doors are open. You can send us a message to request a consultation appointment, and you can get in touch with us by phone at 860-548-1000.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.