Unless you have millions of dollars as either an individual (more than $5,500,000) or as a couple (more than $11 million), you may become nauseated at the very thought of a discussion on estate tax. After all, the federal estate tax is only felt by about 1 in 500 American families.
However, you should really give it some thought. The effects of this bill could one day be felt by you (who’s to say you don’t have a rich, great uncle that’s getting ready to kick the bucket?), or your children (if you inherit said great uncle’s fortune, win the lottery, or strike it rich some other way).
Okay, I guess I’m remotely interested.
I’ll brief you. President Trump and the Republican Party celebrated a victory over a tax-cutting bill released earlier this week. In a nut shell, it doubles the current exclusion amount, going from $5,000,000 to $10,000,000 in 2018 if the bill becomes law. What does this mean, you ask? It means that if you die in 2018 or later and had less than $10,000,000, no estate tax would be paid and your heirs and beneficiaries would inherit tax free. The exclusion amount doubles to $20,000,000 if you are married, meaning you and your spouse can transfer $20,000,000 to your heirs tax free when you die. The current exclusion amounts are half that.
The proposed bill also proposes the complete repeal of the federal estate tax as of January 1, 2024. That’s right – even if you die with $100 million dollars in 2024, your heirs would owe the heart-stopping balance of zero dollars in taxes on their inheritance under the proposed legislation. Yes – zero!
The proposed bill also increases the gift tax exemption amount to $10,000,000, meaning you could gift up to $10,000,000 during your lifetime without paying taxes on it.
In summary, less people than ever would pay taxes, but there would also be less revenue for the Federal government.
I’m Still Not Feeling It.
I get it – this is a really political conversation, and you will probably hear more than you wish about taxes and other politics at Thanksgiving dinner. And of course there is a long way to go before this bill winds up on Trump’s desk for signing into law. But hear me out:
Regardless of the value of your estate, you should keep abreast of this conversation. While the current administration is lobbying for the bill to be passed as proposed, many former administrations have lobbied to decrease the federal estate tax. And future administrations will likely want to have a say as well.
The point is, the number is a moving target, subject to change like any other federal law. And while it may not affect you today, tomorrow could be another story.
So What is Taxable?
In a word, EVERYTHING. It’s not only your home, car, and investments, but your life insurance, paintings, jewelry, etc. While many of us don’t feel like millionaires, it’s easy to have an estate valued at $1,000,000 or more today. If you have a house, car, retirement account, and life insurance, your estate could easily be worth $1,000,000, or more.
If you are lucky enough to have an estate large enough to be taxable, give us a call. We can put you on the path to minimizing that tax and maximizing the inheritance your beneficiaries ultimately receive.
We Tell It Like It Is.
If you’re unsure of your own estate or one that you may soon become responsible for, contact us. We will give you all the raw details, and also walk you through the process – whatever that may be! Info@theprobatepro.com or 248.399.3300.