The Tax Cuts and Jobs Act of 2017 is sure to have some long-term impacts on American finances. Since the change is so recent, experts are still trying to dissect the implications and make predictions about financial futures. Some people claim that the raising of the estate tax threshold will lead to a reduction in charitable giving by high net worth individuals. Others say that, for estate planning purposes, some California residents may even increase their giving, even in light of the changes.
Previously, there was a net worth limit of $5.49 million for individual estates and $10.98 million for couples as far as federal taxes were concerned. Over 80 percent of states have no inheritance taxes. As it was, the estate tax did not affect most Americans, and now that the limits have been raised, the taxes will affect even fewer.
Under the new law, an individual does not have to pay taxes on $11.98 million, and the limit for couples has been raised to $22.36 million. As an income-preserving technique, many individuals in the past have chosen to donate any wealth in excess of the limits to charity in order to avoid tax responsibility, and some may still need to do so. Some say that individuals may still choose to contribute to charity, especially if they have already been involved in philanthropy and have settled on an amount that they wish for their heirs to receive.
For a segment of high net worth individuals in California, the tax law changes may have them rethinking charitable giving, but for others, paying less taxes means more money to give to charities. Some charitable giving can also help to reduce income tax while the individual is still alive. For those who wish for more tax-related information about estate planning, an experienced attorney can provide useful information that can prove beneficial to the person and his or her heirs.
Source: wealthmanagement.com, "Tax Reform and Charitable Estate Planning: Glass Half Empty or Half Full", Robert F. Sharpe, Jr., March 22, 2018