It’s a good time to give. Thanks to the Tax Cuts and Job Acts (TCJA), the lifetime gift tax exemption underwent a stunning increase — doubling to $11.4 million for individuals and $22.8 million for married couples in 2019. Though these limits will expire in 10 years (when they revert to 2017 law), they’ve left those who are fortunate enough to require estate tax planning with a very important question to answer: Should you gift more to kids now that you can?
To assist my clients with making this determination, I start in the same place where all estate planning decisions begin — with the family. We review changes to the family and the children’s families, including financial situations, careers, and ages, as well as current bequests and any changes in philanthropic or other wishes. We then discuss using the exemption to make immediate transfers, directly or through trusts, or through testamentary transfers (upon death). It’s vital that clients understand the major differences between these options and the factors they impact, such as income taxes, basis, investments, and other financial implications. Because a gift is a permanent transfer, it cannot be altered like a testamentary bequest. As such, families considering gifting transfers to future generations must determine whether it’s in the best interest of the family to make the gifts.
To answer that question, I advise my clients to sit down and have money discussions with their heirs to determine the impact gifts will have on their lives and to ensure there’s universal agreement on financial need or readiness.
The new estate tax laws have created an exceptional window of opportunity for increased giving and reduced taxes. However, given the constant focus on estate tax reform, legislative changes could come sooner than anticipated. For this reason, I recommend you speak to your advisor soon — and have that “money talk” with your family members — to determine if now really is a good time to give.
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Disclaimer: The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.