Private Client Services 2017 Year-End Advisory

December 12, 2017 Advisory

Major tax reform has been a hot topic lately as both the House of Representatives and the Senate have passed tax bills that propose significant changes to the current income and transfer tax systems. In this 2017 Year-End Advisory, we outline changes to the transfer tax system set to take place in 2018 under existing law, as well as the changes that would take place under the proposed bills. We also describe a number of year-end planning opportunities that you may wish to take advantage of if you have not done so already.

2018 Estate, Gift and GST Tax Provisions under Current Law

The estate and gift tax exemption and the generation-skipping transfer ("GST") tax exemption amounts for 2018—and beyond—are set as follows:

  • The Unified Federal Estate and Gift Tax Exemption and the GST Tax Exemption. In 2018, these exemptions will be $5,600,000, up from $5,490,000 in 2017. Married couples will be able to shield $11,200,000 from these taxes in 2018, up from $10,980,000 in 2017.
  • 40% Estate, Gift and GST Tax Rate. The maximum estate, gift and GST tax rate will remain at 40%.
  • Annual Exclusion from Gift Tax. The annual exclusion from gift tax will rise to $15,000, after remaining at $14,000 since 2013.
  • Connecticut Unified Estate and Gift Tax Exemption. Connecticut currently has a unified estate and gift tax exemption of $2,000,000. The Connecticut state budget, which the Governor signed into law at the end of October, raises this exemption amount to $2,600,000 in 2018, $3,600,000 in 2019, and in 2020 it will match the federal estate and gift tax exemption. The maximum Connecticut estate tax rate will remain at 12%.
  • New York Estate Tax Exemption. New York's estate tax exemption will remain at $5,200,000 in 2018, with a maximum estate tax rate of 16%. The exemption will increase to match the federal exemption in 2019. However, the seemingly high exemption amount cab be misleading because if your taxable estate at the time of your death is greater than 105% of the value of the exemption, then the exemption is completely phased out. In effect, this estate tax "cliff" will subject your entire estate to New York estate tax.
  • New Jersey Estate Tax Repeal and Inheritance Tax. The New Jersey estate tax has been repealed, effective January 1, 2018. However, New Jersey's more onerous "inheritance tax"—which levies a tax on bequests passing to anyone other than a spouse or lineal family member—is still in effect. The exemption amount for this tax is only $500.

To read the full advisory, please click the PDF link below.