Here’s an incentive to move estate planning to the top of your to-do list: The next few years are an opportunity to maximize wealth transfer to the next generation.
The Tax Cuts and Jobs Act of 2017 increased the federal gift and estate tax basic exclusion amount to $11.58 million per individual, or $23.16 million per couple, adjusted for inflation. But this increase doesn’t last foreverUnder the current tax law, the BEA automatically revert back to $5 million on January 1, 2026,” said Thomas Frank, executive vice president and Northern California regional manager at Whittier Trust.
Many states have their own estate tax laws, most with much lower exemption amounts, added Frank. So while an estate may be tax-free at the federal level, it may be subject to taxes at the state level. Getting your ducks in a row and assessing several “what if” scenarios about lifetime gifting allows you flexibility and time to make sure your plans make the most sense for you and your beneficiaries.
Since you can’t predict the future, it’s best to assess several gifting options now and weigh the pros and cons of each. In the case of highly appreciated assets, the cost of capital gains taxes may be more than your heirs would save on estate taxes. A professional can walk you through options to help you find the smartest strategy.Your unique situation—the mix and allocation of assets in your estate and the laws in your state—will affect how wealth transfer occurs.
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