Holiday Spirits: Save Longer on Estates from this Tax Season!

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What has changed? What hasn’t?

Great news for the rich! The Estate and Gift Tax limits have been hiked further for 2019. As against the 2018 limit of $11.18 million, it now stands at $11.40 million. However, the annual gift exclusion limit remains the same. Besides, those who had already used their limit will now have extra to gift and save some more Estate Tax.

What the $11.40 million Estate and Gift Tax Limit means?

Well, what it means is that beyond the annual gift exclusion limit of $15,000, you can gift in eight figures over lifetime and enjoy a 40% tax exemption on Estate. Delay strategizing for lifetime wealth transfer especially with a clawback already being proposed from 2026 at your own risk!

When to gift? What to gift?

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The $11.40 million can be used in two ways. One can choose to use the limit at regular intervals by transferring wealth to their loved ones whenever they like. This would not only keep the Estate Tax in check but also ensure that appreciation in the Estate value does not have a bearing on the Estate Tax at the time of death.

The second option is that individuals decide to use their limit all at once just before death. The beneficiaries in this scenario would be exempt from paying Capital Gain Tax if they sell the assets right away. Besides that, the value of assets would be intact unlike the regular gifting option. It is called Step-up. It means that the assets would transfer to the beneficiary at their value at the time of death.

Needless to say, those who have lots of money to give away as gifts need to make proper assessments about the kind of assets they wish to transfer and when. The upcoming possible clawback would call for urgent decision making!

Clawback, Proposed Safeguard Regulation and What it means?  

The news that the limit to base Estate Tax exemption would be slashed back to $5 million by 2025 is already doing rounds. That means that you would have to pay enormous tax dues on your estate. That too, all of a sudden! However, a regulation to avoid the estates being struck with huge tax in future is being proposed. It would ensure transferring wealth without worries between 2019 and 2025 (when the current tax cuts expire). The final picture would be clear in the coming months.

Couples need to a pay a bit of extra attention!

The $22.8 million cap for a couple is not applicable on its own. Unlimited wealth transfer to surviving spouse that is free of Estate tax is allowed. However, to take the benefit of unused exemption of spouse, portability of Estate law exemption has to be brought into force. It has to be elected on the tax return of the first spouse to die.   

Exemption Limit isn’t same everywhere

District of Columbia and 17 States have a different set of Inheritance Taxes or a separate Estate Tax. In some cases, death taxes might be applicable based on the first dollar of estate. Many states were of the opinion in 2018, that with the doubled limit many estates are left uncovered. The latest figures from the States, adjusted to inflation for 2019 might be out any time soon!

Estate planning and strategizing wealth transfer professionally can not only save you lots of money but also keep your tax woes at bay. If there are issues regarding Estate and Gift tax that you are unsure about, there is nothing to worry. It’s pretty obvious, given the complexities! With a very high percentage of tax exemption available, that too on a huge base value, each detail regarding tax saving management has to be worked out carefully. At MyTaxFiler, we make sure that your assets return maximum value to your loved one’s even as you continue to save tax. Call us at (888)-482-0279 or email us at tax@mytaxfiler.com so that we have more assets to discuss in the next cycle!

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