Estate, Trust & Tax Attorneys

4500 E. Thousand Oaks Boulevard, Suite 101
Westlake Village, California 91362
(800) 366-1186 • (805) 379-1186 • (818) 889-1296
Fax (805) 379-4975
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TO: Clients and Friends

FROM: J. Peter Wakeman

DATE: December 21, 2017

RE: Estate Tax Update

As you may be aware, Congress has passed the Tax Cuts and Jobs Act which makes significant changes to the estate tax laws. The highlights are:

1. Effective January 1, 2018, the estate tax exemption is doubled from its current level of $5.6 million to $11.2 million, which remains in effect for the next seven (7) years. This means for the next seven (7) years a married couple could leave $22.4 million estate tax free to their children and/or grandchildren.  

2. The law makes an equivalent increase in the gift tax and generation skipping tax exemptions. Therefore, effective January 1, 2018, an individual could gift up to $11.2 million tax free to his or her children and grandchildren. A married couple could gift up to $22.4 million tax free.

3. The increased exemptions expire December 31, 2025.

4. The law retains the concept of “portability” of one spouse’s exemption to the surviving spouse’s estate.

5. The law makes no change to the rules governing a “stepped up” cost basis. Therefore, when an individual dies, all assets of the individual’s estate will receive a new cost basis so that assets can be sold post-death without any capital gains tax.

6. Effective January 1, 2018, the annual gift tax exemption is $15,000 per year per person. Therefore, a married couple can gift $30,000 per year per person without utilizing any of their lifetime gift tax exemptions set forth above.

As with most significant tax law changes, it may be advisable to review your estate plan in light of this new law. If you would like to do so, please feel free to contact my office for a consultation for which there is no cost or obligation.