Last Friday, a consensus was reached by the House-Senate Conference Committee on the competing versions of the House and Senate tax reform bills. The final bill, titled the Tax Cuts and Jobs Act of 2017, is anticipated to be signed into law by the end of this year.
Among the many significant changes contained in the conference bill are provisions concerning transfer taxes. Notably, the conference bill does not repeal the estate tax. Instead, it essentially doubles the estate, gift and generation-skipping transfer tax exemption amounts.
More specifically, as the law currently stands in 2017, the lifetime estate tax exemption is $5.49 million per individual and $10.98 million per married couple. Under the conference bill, the lifetime estate tax exemption would increase to $11.2 million per individual and $22.4 million per married couple, and the exemptions will continue to be indexed for inflation. This doubling of the exemptions sunsets after 2025, such that the exemptions will revert back to $5 million in 2026 and will be indexed for inflation from a base year of 2016. Accordingly, planning now, while the gift tax exemption is doubled for the next several years, may be critical.
Despite the aforementioned changes to the exemptions, a decedent's heirs would continue to receive a "step-up in basis" for assets, such that upon the sale of an asset after the decedent's death, the heirs would only owe capital gains tax on the difference between the sales price of an asset that they inherit and the value of the asset at the decedent's death.
Lara M. Sass, PLLC will continue to keep you updated on any transfer tax law changes. Please feel free to reach Lara M. Sass by phone at 917-628-8007 or by email at firstname.lastname@example.org with any estate planning needs you wish to address.