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An abundance of tax legislation was signed into law in the final days of 2017. In terms of estate and gift tax, here is what individuals need to keep in mind:
Under the new law, which took effect on January 1, 2018, the following changes occurred on the Federal level:
- Federal estate tax, gift tax, and generation-skipping transfer tax exemption amounts increased from $5,490,000 per person to $11,200,000 per person.
- Married couples now have an exemption of $22,400,000.
- These exemption amounts are scheduled to increase with the rate of inflation through the end of 2025.
- On January 1, 2026, the federal estate tax, gift tax, and generation-skipping transfer tax exemption amounts will revert back to the 2017 amounts, adjusted to inflation levels.
- The annual exclusion gift amount an individual may gift to another without incurring any gift tax consequences has increased from $14,000 to $15,000 per donee.
- A married couple may make annual exclusion gifts of $30,000 to as many individuals as they choose.
While many changes are happening at the federal level, it is important to understand the estate tax laws for the state in which you reside. In Maryland, the following changes occurred:
- If you die in 2018, with an estate with a gross value of more than $4 million, an estate tax return must be filed with the Comptroller of Maryland, and estate tax will be due.
- Maryland legislature regarding inheritance tax remained intact, which imposes an inheritance tax on certain beneficiaries. The imposition of inheritance tax is dependent on the relationship of the person to which you are leaving money.
You may be thinking – how do these changes apply to me? Well, as a result of the change in the federal exemptions, individuals should consider the following:
- Making gifts in order to bring his or her estate back to or below the Maryland exemption amount of $4 million. For example, an unmarried person with a $6 million estate could utilize the increased federal exemption to make gifts, free of tax, to bring his or her estate back to or below $4 million. This would avoid that individual’s estate from being subject to Maryland estate tax.
- Governor Hogan recently announced an intent to freeze the Maryland estate tax exemption at or close to $5 million instead of increasing the exemption to match the federal exemption amount in 2019. This makes it even more imperative for individuals to plan accordingly for maximum tax savings.
These are just some of the considerations that can be taken to save taxes. Again, by contacting PK Law, we can assist in estate planning and wealth preservation for individuals. For assistance with your estate planning and wealth preservation needs contact a PK Law Estate Planning or Wealth Preservation Attorney or contact information@pklaw.com
Ashley N. Nelson-Raut is an Associate in PK Law’s Wealth Preservation Group. Ashley graduated from the University of Baltimore School of Law, cum laude. While in law school, Ashley was an Associate Editor for the University of Baltimore Law Forum, a member of the Royal Shannonhouse III Honor Society, Historian of the Phi Delta Phi International Honor Society, and Law Scholar for ILS/Civil Procedure for Professor John Bessler. Prior to law school, Ashley attended Stevenson University, graduating summa cum laude, where she obtained her degree in Paralegal Studies.
This information is provided for general information only. None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.
