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Estate Tax Basic Exclusion Amount Increased From $5 Million To $10 Million

April 18, 2018

Under the recent Tax Cuts and Jobs Act (the "Act”), the basic exclusion amount is increased from $5 million to $10 million for estates of decedents dying and gifts made after 2017, and before 2026. The $10 million amount is indexed for inflation occurring after 2011. Thus, the basic exclusion amount will be $11.2 million for 2018.

The language in the Tax Cuts and Jobs Act does not mention generation-skipping transfers, but because the Generation Skipping Transfer Tax (“GSTT”) exemption amount is based on the basic exclusion amount, generation-skipping transfers will also see an increased exclusion amount.

The GSTT exemption would continue to be the basic exclusion amount which, as indicated above, will be $11.2 million for generation-skipping transfers made in 2018.

The doubling of the basic exclusion amount will cause very few estates to be subject to Federal estate taxation. However, as the Pennsylvania Inheritance Tax has no exemption amount or threshold amount, estates (other than those in which all probate and non -probate assets pass entirely to a decedent’s spouse), will continue to be subject to the Pennsylvania Inheritance Tax.

While the increased basic exclusion amount under the Act is scheduled to sunset on December 31, 2025, Congress could change the Act prior to its sunset. Accordingly, certain high net worth taxpayers may wish to consider making any appropriate lifetime gifts and allocations of GSTT exemption sooner rather than later.

Taxpayers affected by the Act, should contact our estate and trust partner Gary Zlotnick to schedule an appointment with him to have his or her estate plan reviewed to determine if estate planning documents need to be revised.   Moreover, for taxpayers not affected by the Act, if he or she has experienced significant life changing events since the time his or her estate planning documents were drawn up, such as a death of a spouse, birth of a child, or receipt of a substantial inheritance, he or she should also contact Gary Zlotnick to have his or her estate plan reviewed to determine if changes should be made. 

Gary Zlotnick can be contacted at gazlotnick@zarwin.com


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