The passage of the Tax Cuts and Jobs Act has opened up new opportunities for people in Ohio who wish to transfer wealth. Starting in 2018, the exemptions for federal gift and estate taxes have been doubled. An individual can give tax-free gifts up to $11,180,000, and a married couple can give away as much as $22,360,000 without inflicting income tax on the recipients.
The new tax law withdraws these enhanced exemptions in 2026 when the tax-free limits will return to 2017 levels. Individuals developing a gifting strategy for large sums should take advantage of the new exemptions. One financial adviser said that estates with assets that will appreciate in value could gift them and shift the future tax burden out of the estate.
People can also send gifts to trusts. The assets sent to a trust gain protection from the creditors that might have claims upon the beneficiaries. Trusts could also shield assets during a divorce when a beneficiary must split marital assets. The terms of a trust could apply rules that designate how and when the trust can distribute funds to beneficiaries.
Trusts and gifts sometimes represent methods for allocating an estate so that people can avoid the public probate process when transferring wealth. A person who wants to explore how estate planning strategies could apply to a specific situation could consult an attorney. After evaluating the person’s goals, an attorney could recommend how to design a trust or schedule gifts. An attorney’s investigation of tax law could help the person understand tax obligations and potentially limit them. An attorney could write all of the documents needed to complete an estate plan.
Source: National Law Review, “Estate Planning Strategies: How to Take Advantage of the New Federal Tax Reform“, Feb. 21, 2018