Next | How to safeguard access to your accounts
July 12, 2019 / F&M Trust
A guide to federal tax exemption changes

A guide to federal tax exemption changes

If you’re sitting on a large estate, listen up.

A temporary provision of the Tax Cuts and Jobs Act, substantially lowering the tax cost of transferring wealth, will sunset in seven years. And those who take advantage of it before it ends will avoid a hefty bill from Uncle Sam come 2026.

In other words, the time to gift is now, before the gift and estate tax exemption — also known as the basic exclusion amount — is sliced in half.

Gifting, which involves the transferring of cash, units of real estate and/or businesses to the next generation, reduces the value of the taxable estate upon death. Amounts on gifts and estates over the exemption levels are taxed at 40 percent.

Under the current provision, over a lifetime, untaxed gifts can total up to $11.4 million for an individual and $22.8 million for a married couple, with both dollar amounts adjusted for inflation. That’s in addition to the annual gift exemption of $15,000, which is the amount that can be given away by one person to any number of people per year, tax-free, without those gifts counting against the lifetime exemption. Notably, the annual gift exemption of $15,000 will not be reduced with the lifetime exemption.

Furthermore, under today’s tax law, the present and future appreciation, or an increase in the value of assets over time, escapes estate tax.

But that all ends on January 1, 2026, when the lifetime exemptions revert back to the pre-2018 levels of $5.7 million for an individual and $11.4 million for a married couple. Also, appreciation will once again be taxed.

After the tax overhaul was signed into law, there was great concern that gifts given during this window would be taxed when the exemptions fell, but the Treasury and Internal Revenue Service have rolled out regulation allowing for those who make large gifts between now and 2026 to do so without the fear of a clawback.

So, there’s no better time than the present to share your wealth. Those with estates valued at $10 million or more should contact an F&M Trust Investment & Trust Services professional today to discuss planning opportunities.

 

Recent Articles
How to safeguard access to your accounts
How to safeguard access to your accounts

How to safeguard access to your accounts

July 19, 2023 / Jordan Peffer

Seven tips for buying your first house
Seven tips for buying your first house

Seven tips for buying your first house

July 12, 2023 / David Kuhns

How much do I need to save for retirement?
How much do I need to save for retirement?

How much do I need to save for retirement?

July 05, 2023 / Christian C. Merritt, III

Is bundling insurance right for me?
Is bundling insurance right for me?

Is bundling insurance right for me?

June 28, 2023 / Levi Crouse

Soft landings require skill; Is the Fed instrument-rated?
Soft landings require skill; Is the Fed instrument-rated?

Soft landings require skill; Is the Fed instrument-rated?

April 21, 2023 / Warren Hurt

50/30/20 rule helps with budgeting
50/30/20 rule helps with budgeting

50/30/20 rule helps with budgeting

April 13, 2023 / Courtney Shauf

What is Inflation?
What is Inflation?

What is Inflation?

April 07, 2023 / Joel Huffer

With recession possible, should I review my portfolio?
With recession possible, should I review my portfolio?

With recession possible, should I review my portfolio?

April 03, 2023 / The Merrill Anderson Company

Required Minimum Distributions in 2023
Required Minimum Distributions in 2023

Required Minimum Distributions in 2023

March 20, 2023 / The Merrill Anderson Company

Join our e-newsletter

Sign up for our e-newsletter to get new content each month.

NOTICE: YOU ARE LEAVING F&M TRUST!

You are now leaving the F&M Trust website. Links to third-party sites are provided for your convenience. Such sites are not within our control and may not follow the same privacy, security or accessibility standards as ours. F&M Trust neither endorses nor guarantees offerings of the third-party providers, nor is F&M Trust responsible for the security, content or availability of third-party sites, their partners or advertisers.