Tax Bracket Estate Planning Opportunities

March 02, 2018
4 Simple Tips: Your Estate Planning Checklist

The Republican tax bill means big changes for American taxpayers. The House Ways and Means Committee issued the Tax Cuts and Jobs Act (TCJA) on November 2, 2017.

The new tax brackets for 2018 will affect nearly all taxpayers, but what do you need to know specifically for estate planning?

TCJA Impact on Estate Planning

The first thing to be aware of is that the TCJA doesn’t repeal the federal gift and estate tax. It temporarily doubles the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption.

The exemption increases your planning opportunities. Even if they are temporary, reverting back to their previous levels in 2026, these record-high exemptions create an opportunity to lock in your wealth and permanently avoid future transfer taxes.

The strategies that will work best for you are the ones that you have planned out with an accurate understanding of your full spectrum of options.

  1. Lifetime Gifts

You can use your increased exemption to make additional tax-free lifetime gifts. However, income taxes can be increased on any gain realized by the recipients, should they sell a gifted asset.

When you’re weighing the potential estate tax savings against the potential income tax costs, you will want to choose a careful strategy. You may need to consult with an estate planning attorney, as you map out the opportunity of lifetime gifts to shield your wealth from taxation in your estate.

  1. 529 Plans

How has the TCJA’s new tax brackets impacted 529 plans? What does this mean for your estate planning tools and strategies?

529 college savings plans, which permit tax-free withdrawals for qualified educational expenses, offer unique estate planning benefits that you should know about. Beginning in 2018, tax-free distributions can be used for elementary and secondary school, not only higher education, expenses.

You can bundle five years’ worth of annual gift tax exclusions into one year without triggering gift or GST taxes or using your exemptions. Contributions are removed from your estate while you retain the right to change beneficiaries or get your money back – it’s worth keeping this in mind as you solidify your estate planning strategies in 2018.

You may need further information as you investigate your investment choices offered within each plan and weigh additional factors.

  1. Dynasty Trusts

If you haven’t already put this into action, you can shield your wealth by establishing a dynasty trust.

While the longevity of a dynasty trust varies among states, it’s becoming more common to permit these trusts to last for hundreds of years or in perpetuity. The key to avoiding the GST tax – an additional 40% on transfers to grandchildren or others that skip a generation – you can leverage your GST tax exemption, which will be higher than ever in 2018.

All the information you need to know is at your fingertips as a LegalShield member. Download the LegalShield app, click and call.

Bottom Line

The new tax brackets open up your estate planning opportunities and you’ll need a consultation to figure it out. Our team will help you to take full advantage of the opportunities the TCJA creates for you and your estate planning.

With LegalShield, you’ll have legal advice whenever you need it at an affordable price point.