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Under the newly enacted Tax Cuts and Jobs Act, the Federal estate, gift and generation-skipping tax (GST) lifetime exemption amounts have now increased to $11.2 million for individuals and $22.4 million for married couples. After increasing with inflation each year through 2025, the exemption amounts will revert back to the 2017 levels ($5,490,000 and $10,980,000) on Jan. 1, 2026. These substantial, yet temporary, increases in the exemption amounts present a unique opportunity for the implementation of various estate planning techniques that will allow the transfer of wealth to future generations.

Taxpayers should consider taking advantage of the increased gift tax and GST exemption amounts by making gifts to their children or grandchildren (either outright or in trust). In order to leverage their gift and GST exemptions even more, taxpayers can utilize advanced wealth transfer techniques as well. These include sales to defective grantor trusts or the funding of grantor retained annuity trusts (GRATs) and split-interest charitable trusts. It is important to note that certain of these techniques are more effective in a low interest rate environment. With interest rates expected to rise significantly, it may be advantageous to act in the near future. 

It is also recommended that you review the terms of your wills and revocable trusts at this time to ensure they remain in accordance with your wishes. If your post-death trusts are funded according to a formula clause tied to the exemption amount, they may need to be revised to coincide with the new larger exemptions. To review your estate planning and wealth transfer strategies, contact us in one of our many locations