How Tax Reform Made Your Estate Plan Obsolete

If you are among the many taxpayers who had wills and other estate planning documents prepared prior to this year, don’t be too eager to delete your estate planning advisor from your rolodex. Thanks to changes to the federal estate, gift and generation-skipping tax exemptions made by the recent Tax Cuts and Jobs Act (“TCJA”), these documents may now be obsolete.         

Before the TCJA, the first $5 million, or $10 million per married couple (as adjusted for inflation), of transferred property was exempt from federal wealth transfer taxes. For decedents dying and for gifts made from 2018 through 2025, the TCJA doubles the amount that can be excluded from these taxes. Indexing for post-2011 inflation, this means that individuals can transfer up to $11.2 million, and married couples up to $22.4 million, on a tax-free basis.      

This increased exemption amount may trigger the need for you to re-draft some important documents, including wills and trust agreements. Many estate plans that were prepared under prior law provided for the automatic creation of a “credit shelter” trust in order to fully utilize the exemption amount of the first spouse to die. The changes to the law made by the TCJA may cause the credit shelter trust to be unnecessary in many cases. Furthermore, an unnecessary credit shelter trust may also forfeit the benefit of the basis step-up at the death of the second spouse.  

You should contact your estate planning advisor as soon as possible to discuss the impact that the TCJA may have on your current estate plan.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Proposed Tax Legislation for 2023?
Are Your Digital Assets Lost Forever?
EV Tax Credit Overview and Reference Guide
Tax, Tax Reform BY Derek Godwin
Research and Development Tax Capitalization Rules: Are You Ready?
IRS Gave the Gift of Higher Estate and Gift Tax Limits for 2023
Accelerating Charitable Efforts Act Under Consideration
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Pittsburgh

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.

×