We have had a federal tax on inheritances (the so-called “death tax”) since the Civil War. The modern estate tax has been on the books since 1916, but in 2016 the estate tax brought in only $18 billion, or less than 1% of U.S. tax revenue. Even so, this relatively minor tax became a major battleground during last year’s tax debate.
Many Republicans wanted a permanent repeal of the “death tax,” saying it amounts to double taxation and unfair burden on family-owned businesses and farms. Others say the erosion of the “death tax” is a giveaway to the richest Americans at a time of increasing wealth disparity. Many of those in favor of the death tax see it as the best solution to reduce the trillion dollar national debt that threatens the financial security of future generations. After all, the reasoning goes, the baby boomers will be leaving an unprecedented amount of wealth to their children, why not ask those same lucky souls to pay down the debt?
New Tax Bill:
The tax bill that President Donald Trump signed into law doubled the amount of wealth that escapes the 40 percent estate tax. Starting in 2018, the new law exempts about $11 million for individuals and $22 million for couples (the exact amount depends on the inflation adjustment), but only until 2026, when the thresholds will revert back.
So, will the new tax bill affect your estate plan? Unless you are worth more $11 million ($22 million for a married couple), it will not.
But, for those of you who have older estate plans, created when the tax exemption was much lower, say prior to 2010, you probably want to consider updates to and simplification of your plans.
Questions? The Law Office of Debra Simms is here to help. Call us today with questions. 386.256.4882