It seems that taxes permeate our lives. From sales tax to income taxes, we’re always facing another tax. Two taxes specifically affect estate planning: estate tax and gift tax. The Internal Revenue Service (IRS) regulations for these two types of taxes may be complicated. For example, there are limits and exclusions that you can take advantage of – if you know they exist. The rules also change, sometimes yearly. As you work on your estate plans, it’s important to understand the 2019 estate tax and gift tax limits.
What are estate taxes?
Estate taxes are charged based on the value of your property at time of death. Note, however, that not all of your property becomes part of your probate estate used to calculate estate tax. Property passed through trusts, joint property ownership, or beneficiary designations typically does not
What are gift taxes?
Gift taxes may be charged if you transfer money or property to another person without receiving full value in return (i.e., a gift). Two exclusions, or limitations, apply to gift taxes: the annual gift tax exclusion and the lifetime exclusion.
What are the 2019 estate tax and gift tax limits?
President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) into law in December 2017. Among other things, TCJA increased the estate tax exemption to $11.18 million in 2018. In 2019, the rate increased again to $11.4 million. Individuals can now exempt up to $11.14 million from estate tax. Married couples may shield up to $22.8 million.
In 2019, the annual gift tax exclusion is $15,000. This means you can give up to $15,000 to as many individuals as you want without having to pay gift taxes. But what if you want to give someone $30,000 without paying taxes? You may elect to use your lifetime gift tax exemption to cover that additional $15,000. However, using your lifetime gift tax exemption typically reduces your estate tax exemption.
Make Sure You Take Full Advantage of 2019 Estate Tax and Gift Tax Limits
Learn more about coordinating your estate plan with your IRS tax exclusions. It’s especially critical if your estate may reach or exceed the individual $11.4 million exemption. Also, remember that the tax cuts provided through the TCJA may expire in 2025. Your long-term estate planning may be affected.
Call Virtus Law at 612.888.1000 or send us an email at info@virtuslaw.com. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.