The year has come to a close with the passage of the Tax Cuts and Jobs Act of 2017 and many of us are trying to determine the impact to our tax profile and to our families.


Let’s start with the impact on our families and the financial legacies that are changed by the Act. In sum, children will receive more of their parent’s estate than would have otherwise been paid to the Federal government. Also, there can be more lifetime gifting of assets without incurring gift tax.

  • Federal Estate, Gift, and Generation-Skipping Tax Exemptions. The federal estate, gift, and generation-skipping tax exemptions will be doubled to approximately $11,210,000 per individual as of January 1, 2018. (The exact amount may vary slightly due to an inflation adjustment).
  • Federal Tax on Amounts Over the Exemption. The tax rate on transfers in excess of the exclusion amount will remain at 40%.
  • Expiration of Increased Amounts. The increased exemption amounts expire on December 31, 2025. You may be tempted to wait, given that seven years may feel like forever. But remember that this tax legislation is likely to be heavily modified if the political pendulum swings in the other direction. Plans can be implemented to take advantage of the higher exemptions, and flexibility can be built into a plan, including trust protectors, powers that allow you to create new trusts (called decanting), and other strategies to deal with future changes.
  • Annual Gifting.
    • Annual Gift Exclusion Now at $15,000. The annual gift tax exclusion will continue to be available, but after many years of being stagnant at $14,000 per recipient per year, it increases to $15,000 per recipient per year in 2018. Remember that when gifting an asset during your lifetime, the recipient receives the gifted asset with the donor’s cost basis rather than a stepped-up income tax basis that the asset would receive if held until the donor’s death and transferred at that time or if the asset were sold for fair market value.
    • 529 Plans. The use of 529 plans has been expanded to provide that elementary and secondary school (previously it was higher education only) expenses of up to $10,000 per year will be qualified expenses for qualified tuition programs, as well as permitting the rollover of any funds held in 529 accounts to ABLE accounts (for individuals with disabilities) under certain scenarios.


More for you Kids! This means that starting in 2018, a married couple, with proper planning, would have the use of $22,420,000 in estate tax exemption, provided that certain actions are taken when the first spouse dies. An unmarried person has $11,210,000 in estate tax exemption available. Remember, estate tax can generally be deferred with marital deduction and exemptions until after the second spouse’s death. For estates in excess of these amount, estate tax is incurred at the rate of 40% of the excess amount.

Disproportionate Distribution of your Assets! For many clients who have provided for distribution of the first spouse’s assets between various trusts (one for the surviving spouse, and another for surviving spouse and or children), this issue will have no impact. This is because they have a plan that does not require the allocation of assets between the two shares or because the surviving spouse is the sole or primary beneficiary of all of the various trusts and has a good relationship with the remainder beneficiaries (often the client’s and surviving spouse’s children). In some cases, however, the remainder beneficiaries of one or more of the trusts are the surviving spouse’s step-children, or other individuals or charities, which can create the possibility for dispute.


The Act will reduce the effective income tax rate for many taxpayers and curtail the application of the Alternative Minimum Tax. Many deductions will be limited, including the mortgage interest deduction, the deduction for state and local income taxes and sales taxes, and the deduction for tax preparation expenses. A special deduction will apply to certain types of business income. Please contact your accountant for further information on these changes and specific actions you may wish to take.


  • Review your estate plan! Contact us if you would like our assistance to review your plan in light of these new developments or if there have been any significant changes to your family or financial situation.
  • Contact your CPA. Make an appointment with your accountant to review the possible impacts of the Act to your tax profile and any potential actions your CPA recommends taking.
  • Reconsider your Gifting in 2018. Take advantage of the $15,000 per recipient per year annual gift exclusions.
  • Rethink your Contributions to 529 Plans. Considering the additional permitted uses of these accounts without adverse income tax consequences, certain clients might consider expanding the funding of existing 529 accounts or possibly establishing new accounts to benefit future generations.

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