Ask the Estate Planning Attorney Bergen County, NJ: The Tax Cut and Jobs Act and My Estate Plan, Part I

The “Tax Cut and Jobs Act,” TCJA for short, is major legislation that affects individuals, businesses, and tax-exempt and government entities. Passed in December 2017, several changes were made to the individual income tax that affects estate plans and retirement planning. This first post will examine the generation-skipping transfer tax exemption. The next post will review TCJA’s impact on retirement planning, specifically Roth conversions, 529 savings plans, and the elimination of the individual mandate provision of the Affordable Health Care Act.                                                               

Before we get started on the discussion for today’s topic, a disclaimer. The Giro Law Firm does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. You can also call us at (201) 690-1642 or request an appointment online to schedule a review of your current estate plan or create a new one.

Impact on Your Estate Plan

The generation-skipping tax (GST) can be assessed when grandparents directly transfer money or property to their grandchildren without first leaving it to their parents or the grandparent’s children. The parent’s generation is skipped to avoid an inheritance being subject to estate taxes – twice. Once when the money or property moves from grandparents to their children and then a second time when the money or property moves from the parents to the grandchildren of the grandparent making the gift or transfer.

The TCJA does not repeal the federal gift and estate tax, as it originally proposed, and instead temporarily reduces the potential impact of these taxes. The exemptions are scheduled to revert to their previous levels in 2026 and there is no guarantee that a future Congress will keep the exemptions or make further reductions.

The GST does not apply to grandchildren. It also addresses gifts or transfers made to other family members and to unrelated individuals who are at least 37½ years younger than the donor. All such beneficiaries are referred to as “skip persons.”

According to the TCJA, for the estates of persons dying, and gifts made, after December 31, 2017, and before January 1, 2026, the gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption amounts increased to an inflation-adjusted amount. In 2017, those amounts were $10 million for individuals and $20 million for married couples. In 2018, the amounts were increased to $11.18 million for individuals and $22.6 million for married couples.

Trusts can be Skipped Persons, Too

Trusts can also be considered skip persons under certain circumstances. Ask an estate planning attorney in Bergen County, NJ today about an estate plan, including trusts, to minimize the tax consequence of gifts and transfers. Helping families with their elder law, family law, and estate planning needs in Hackensack, New Jersey, our estate planning attorney helps families with Medicaid planning, special needs, probate, veteran’s aid, and family law needs. To request a consultation with an estate planning attorney Bergen County, NJ, click here or call (201) 690-1642 now.