Are you worried about the Estate and Gift Tax limits for 2019? Confused about the new tax provisions? The IRS has issued tax year 2019 inflation adjustments for more than 60 tax provisions, including tax rate schedules. They also announced the official estate and gift tax limits for 2019 as follows: the estate and gift tax exemption is $11.4 million per individual, up from $11.18 million in 2018. That means an individual can leave $11.4 million to heirs and pay no federal estate or gift tax, while a married couple can shield $22.8 million. In this article we break down the Estate Tax Exemption, the Gift Tax and what you can do now to minimize your future tax liability.
1. What Is The Estate Tax Exemption?
The estate tax is a federal tax imposed on estates over a certain value. That value is known as the “estate tax exemption,” “combined estate and gift tax exemption,” or “unified credit.” If an estate is worth more than the exemption amount, the value over the exemption amount will be taxed. If the estate is worth less than the exemption amount, there is no tax liability. The higher the exemption amount, the less estates will have to pay in taxes. The Trump Presidency tax cuts are scheduled to expire after 2025, meaning the estate tax exemption will revert to its inflation-indexed base of $5 million. Estates of decedents who die during 2019 have a basic exclusion amount of $11.4 million; the previous year was $11.18 million. The basic exclusion amount for gift and the estate tax is $11.4 million plus deceased spousal unused exclusion amount. If you live in one of the 17 states or the District of Columbia that levy separate estate and/or inheritance taxes, there’s even more at stake, with death taxes sometimes starting at the first dollar of an estate. California does not have a State inheritance tax.
2. What Is The Gift Tax “Annual Exclusion Amount” For 2019?
The annual gift exclusion amount for 2019 remains at $15,000 per individual each year, unchanged from 2018. This means you can give $15,000 to as many people you want each year without filing a gift tax return. You can exclude that $15,000 from a gift tax return. For most people, gift taxes will not be a concern since the combined estate and gift tax exemption is so high. However you are still required by law to report gifts over the annual exclusion amount on a gift tax return, IRS form 709. There are few significant changes to Form 706, United States Estate and Generation-Skipping Transfer Tax Return. The one change that will impact all filers is the elimination of the allowable State Death Tax Credit, for decedents dying in 2005 and later years, is a deduction.
3. What Can You Do Now? Minimize Taxes Through Estate Planning
Sometimes gifts can be used strategically to avoid estate taxes or to minimize other problems after death. There are many advanced estate planning strategies available to help reduce or minimize the estate tax. Other times, gifts can have adverse tax consequences. Estate and gift taxes are a complicated estate planning topic. It is always a good idea to talk to an attorney before making a major gift. Misunderstanding these concepts or failing to prepare for them can hold critical consequences for your beneficiaries. As always, our advice is to speak with an experienced estate planning attorney so you are able to choose the best path to protecting your assets.
Are You Worried about Your Estate Plan?
If you are not prepared with a current estate plan then your family could be vulnerable to higher tax bills, extensive legal fees, and familial conflicts. To avoid those obstacles you should visit an Estate Planning Attorney to get professional help, and create a plan that well suits your goals.
At The Law Offices of Joel A Harris located in the cities of Concord, Walnut Creek, Antioch, California, we have worked for over 25 years giving the best guidance our clients need to protect their assets. Have a question about your planning your estate? Feel free to schedule a sit-down meeting where we are happy to patiently answer every question you may have. For your free consultation reach out to us at (925) 757-4605.