The Consumer Price Index was released by the Labor Department in August 2017. Not everyone anxiously awaits the release of these numbers but the experts have now made estimates of how they will impact estate, gift, and generation-skipping transfer taxes for 2018. These are not official numbers – the Internal Revenue Service will publish the official numbers later this year.
Transfer Tax Free Money – The cumulative amount you can pass tax-free (by gift or at death) is projected to increase to $5,600,000.00 per U.S. citizen (from $5,490,000.00 in 2017). In 2018 and beyond, a couple (U.S. Citizens) will be able to collectively transfer $11,200,000.00 without incurring a federal estate or gift tax. The cumulative amount you can apply to gifts made to grandchildren and beyond (the generation-skipping transfer tax (GST)) is projected to increase to $5,600,000.00 per U.S. citizen (from $5,490,000.00 in 2017).
Annual Exclusions – Each year you get a free pass (the “annual exclusion”) for gifts under a specified dollar value. The annual exclusion is projected to increase to $15,000 per individual recipient (from $14,000.00 in 2017). The amount of gift tax-free pass to a spouse who is not a U.S. Citizen (the so-called “super-annual exclusion”) is also projected to increase to $152,000.00 (from $149,000.00 in 2017).
Marital Matters – A U.S. Citizen may transfer to his or her surviving spouse an unlimited amount without incurring a gift or estate tax (this is no change in the law). In addition, married couples will continue to have the ability to transfer any unused federal estate and gift tax exemption to their surviving spouse. This is commonly referred to as “spousal portability” but more properly referred to as the Deceased Spousal Unused Exclusion or “DSUE”. The unused estate and gift tax exemption may only be transferred to a surviving spouse and does not apply for unused GST exemption. Careful attention should be paid when planning to maximize both an individual’s estate and gift tax exemption and their GST exemption.
In spite of the fact that South Carolina does not have a state estate or inheritance tax, the application of state law is still important if a South Carolina Resident has assets in other states or they anticipate moving to another state.
What is the impact of the prognosticators’ new numbers? Continued good news – with good planning most U.S. Citizens will not be subject to estate, gift or generation-skipping transfer taxes. You may concentrate on making decisions based upon what you think is best for your family and your beneficiaries.