The new and final tax bill has some major advantages for wealthy Americans.
In late December, President Trump signed the “Tax Cuts and Jobs Act” into law, delivering $1.5 trillion dollars of tax cuts to various areas of the economy, including business entities, individual taxes, gift taxes, and more.
The estate tax exception will likely change under these new tax outlines, as well. For 2015, an individual could leave bequests (gifts to other individuals upon their death) worth up to $5.43 million free of any federal estate tax, which is the estate tax exception. But now, the new law doubles the estate tax exemption to $11.2 million and $22.4 million for couples.
“It’s a huge benefit to the wealthy,” said Beth Kaufman, an estate lawyer with Caplin and Drysdale in Washington, D.C.
According to FactCheck.org, the new tax provisions will expire at the end of 2025. These new exception policies, however, will eliminate estate tax liability for individuals with estate assets between $5.6 and $11.2 million (plus double for couples). Unless Congress votes in the future to extend it, the estate tax would likely revert close to the previous level by 2025, too, although slightly higher because of the substitution of the chained Consumer Price Index for the current CPI formula.
“Most estate tax is paid by extremely wealthy people, so even doubling the exemption leaves most of it in place,” added Eric Toder, co-director of the Tax Policy Center.
Forbes adds that the tax bill doesn’t affect the changes to the rules in terms of step-up basis at death. Meaning, when a person dies, their heirs’ cost basis in the assets left to them will be reset at the specific value after death.
There should be many more legislative battles over the course of the next few years in terms of these new tax provisions, but critics of the estate tax are celebrating a long awaited victory this January.
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