Changes in the estate and gift tax have made transferring wealth easier than before. New but temporary higher exemptions allow individuals and couples to gift, bequeath or give to the next generation greater sums of money than ever before. In California, there is less worry about estate taxes, but the concern still exists for some, and certain strategies can help those who worry about protecting assets.
From now until 2025, the new tax law allows an individual to gift $11.2 million tax-free. The amount is doubled for couples. Any gifts surpassing that number are subject to a 40 percent estate tax. A generation-skipping transfer is also subject to an additional 40 percent tax, per current tax law.
Taxes are a concern, but an individual may still be able to reach his or her goals with the use of trusts. A generation-skipping trust allows an individual to pass wealth to grandchildren or great-grandchildren while protecting them from future tax liability. When an individual gifts a sum of money within the tax exemption range in a generation-skipping trust, the trustees are not liable for future taxes, even if the trust fund appreciates in value. Any future appreciation of assets goes directly to the beneficiaries.
Taxes and estate planning can be complicated, but the reward of proper planning comes in protecting assets. A person in California interested in making decisions that can reduce his or her tax liability may desire extra help. Many choose to consult with an experienced estate planning attorney for more information about estate taxes, planning and generation-skipping trusts.
Source: greenbaypressgazette.com, “Taxes and estate planning: New tax law exemptions“, Andrew Farah, May 16, 2018