Guide to 2018 Estate Tax Law Changes

From the desk of San Diego Trust and Estate Attorney, Kristina R. Hess of KR Hess Law, PC

Greetings and a very Happy New Year!

I hope everyone is having an amazing new year. 2018 is set to be a stellar year – even if we have a little market correction going on …

We are in full swing here at KR Hess Law and will continue to offer regular seminars on the Truth About Estate Planning.

Update on the Estate Tax and the New Law

Under the new tax reform law, the estate tax credit has increased to $10 million per person. This figure is adjusted for inflation. Thus, in 2018, you can pass $11.2 million tax free. If you are married, that means you and your spouse can pass over $22 million tax free. This increased credit also applies to the lifetime gift credit and the Generation Skipping Transfer Tax exemption. If you have a Trust for your assets, you can set up the trust to be asset protected for your beneficiaries and go to the grandchildren or other heirs in another generation, tax free.

Now, that the estate tax credit is so high, only less than one-half of one percent of the US population will have a taxable estate. As a result, the analysis has shifted to planning to save on capital gains taxes.

If you have an older AB Trust which was drafted by another lawyer (KR Hess Clients do not have older AB Trusts), and it has a mandatory formula splitting assets upon the death of the first spouse – your heirs could potentially pay thousands if not hundreds of thousands of dollars in avoidable capital gains taxes (up to 38%). The capital gains tax rates are unchanged. Thus, if you have one of these older Trusts, contact us about a trust review. You can set up your Trust so that the basis in the assets will step up on the first spouse’s death and then again upon the survivor’s death. Your heirs will thank you for saving them thousands and thousands of dollars!! You want to take full advantage of the new laws and know that you are setting up your generations for success.

That’s it for the 2018 estate tax update.

I hope you’re having an amazing year and I look forward to seeing you soon.

Kristina Hess
Trust and Estate Lawyer