The Tax Cuts and Jobs Act of 2017 (or the 2017 Trump tax cuts) will allow taxpayers to shield more assets from the estate tax in 2023. See Ashlea Ebeling, The Moves Wealthy Families Are Making to Skirt Estate Taxes. The Tax Cuts and Jobs Act of 2017 allows individual taxpayers to transfer up to $10 million to their heirs/beneficiaries, via trusts or other legal instruments, without paying estate taxes. Id. Unless Congress renews the tax cuts, the 2017 tax cuts will expire on January 1, 2026, when it will revert back to its pre-2017 levels of $5 million, adjusted for inflation. Id. Therefore, if your personal wealth is up to $12.92 million in 2023, this is an opportunity to make tax-free transfers by having an attorney create a trust for your beneficiaries to shield your wealth before the Tump tax cuts expire.
The $10 million figure in the Tax Cuts and Jobs Act of 2017 was indexed for inflation. For instance, indexed for inflation, individuals are eligible to transfer up to $12.92 million for 2023 or $25.84 million per married couple to their heirs/beneficiaries during their lifetimes, or after death.
How the Tax Cuts and Jobs Act of 2017 Impacts You
The Tax Cuts and Jobs Act of 2017 will likely not impact you if you are not a millionaire. However, if your personal wealth is up to or exceeds the $12.92 million threshold, take advantage of these tax cuts by having an attorney create a trust for you. One of the advantages of having an attorney create a trust is that, after transferring your assets to a trust, all the growth on the transferred assets is outside of your taxable estate.
Additionally, if your personal wealth exceeds the $12.92 million threshold under the Tax Cuts and Jobs Act of 2017, you can put yourself under the tax threshold and shield more assets from the estate tax before 2026 by reducing the value of your estate through tax-free gifts. For instance, you can put yourself under the tax threshold by regularly giving money to children, grandchildren, and/or charitable organizations. The annual tax-free gifts dollar limit for 2023 is $17,000, which does not have to be reported to the IRS. See IRS, Gifts & Inheritances. Annual gifts of over $17,000 must be reported to the IRS on Form 709. Id. The $17,000 annual tax-free gifts limit does not impact the $12.92 million estate tax exemption that individual taxpayers could transfer to their heirs/beneficiaries via trusts or other legal instruments.
So, if you are a high-net-worth individual, unless Congress renews the 2017 Trump tax cuts, 2025 is the last year to take advantage of the opportunity to make tax-free transfers by having an attorney create a trust for your beneficiaries to shield your wealth before the 2017 tax cuts expire on January 1, 2026.
To learn more about updating or creating a new trust, contact Prestige Law Office. The firm handles estate planning for Wauwatosa, Pewaukee, Brookfield, Waukesha, Kenosha, Racine, Whitefish Bay, and the greater Milwaukee area. Contact the firm at 414-459-1632 to get started and to schedule a consultation.
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