The official estate and gift tax limits for 2019 were announced by the IRS. The news for high-net worth families is good. The estate and gift tax exemption will be $11.4 million per individual and $22.8 million for married couples. There will be no changes to the annual gift exclusion amount of $15,000.
New increased limits to estate and gift taxes present new planning opportunities for all but especially for the wealthy, reports Forbes in a recent article, “IRS Announces Higher 2019 Estate and Gift Tax Limits.”
For the rest of us, these new limits should serve as a reminder that we all need estate plans, even if we don’t have an estate that comes close to these limits, especially in New York, where the tax exempt amount for individuals remain at just over $5 million and there is no portability between married couples.
The Trump tax cuts severely reduced the number of estates that will be subject to the federal estate tax this year. The tax reform doubles the exemption amount from a base level of $5 million per person.
There were just about 1,890 taxable estates in 2018. According to the Tax Policy Center, compared to 4,697 taxable estates in 2013 with a base $5 million exemption. There were 52,000 taxable estates in 2000, when the exemption was $675, 000.
An unlimited marital deduction lets you leave all or part of your assets to your surviving spouse free of federal estate tax. However, to use your late spouse’s unused exemption (known as “portability”), you must elect it on the estate tax return of the first spouse to die – even when no tax is due. The issue is, if you don’t know what portability is and how to elect it, you could be surprised with a huge federal estate tax bill. That should be part of your conversation with your estate planning attorney.
New York is one of the 17 states and DC that impose separate estate and/or inheritance taxes, there’s even more at risk. In New York, if your estate tax is 5% over the applicable New York estate amount, the death taxes start with the first dollar of an estate. This is a serious tax and is worth planning.
While some states had plans to match the federal exemption amount for 2018, state legislators recognized that the new exemption was too high to be economically sustainable. Inflation-adjusted numbers have not yet been released for 2019 by most states, and the federal estate tax law will expire in 2026, thereby basing state law on the federal plan may be unpredictable.
We welcome questions about the estate tax law and invite you in to our firm to review and update your existing plan in light of the current estate tax laws.
Reference: Forbes (November 15, 2018) “IRS Announces Higher 2019 Estate and GIFT Tax Limits”