As a result of the recent tax bill, beginning in 2018, the lifetime estate and gift tax exclusion (which is indexed for inflation) is projected to rise to $11,200,000 (!) from $5.49 Million during 2017. This is the limit on tax-free transfers during life or at death. This means that couples who have not yet made any lifetime gifts will be able to avoid estate taxes with a combined estate of less than $22,400,000. Importantly, it may be necessary for a surviving spouse to file an estate tax return for their deceased spouse in order to take advantage of this combined exclusion amount.
The annual gift tax exclusion should also increase this year to $15,000 (from $14,000 for the past few years). So, beginning in 2018, you can make a gift of $15,000 to as many people as you like without counting against your lifetime exclusion. Spouses can combine their annual exclusions to give a combined $30,000 to anyone they choose.
In addition to this annual tax exempt amount, taxpayers can make non-taxable gifts to pay for tuition, dental, and medical expenses for anyone they choose. However, the payments must be made directly to the provider of the service – they don’t count as non-taxable gifts if they are made as reimbursements.
If you have questions about how these rules may apply to you, please contact us and we’ll be glad to help.
Horizon Advisors is a Houston based fee-only wealth management firm. Horizon is a fiduciary advisor. We specialize in helping successful individuals and families understand, organize, and manage their often complex financial situations. Horizon offers integrated financial planning and investment management services.