The Tax Cuts and Jobs Act passed in 2017 will take effect this year, and it means big changes for some New Jersey taxpayers. The jump in the federal estate and gift tax exemption to $11.8 million may be good news to those with a large estate. However, these individuals may want to review their estate plan in light of these tax law changes, so that they can ensure they are utilizing the new laws to their greatest advantage.
First, if a person wants the value of their taxable estate to drop low enough that the federal estate tax will not apply to them, they can consider making charitable donations. Specifically, they should choose charities that have been approved by the Internal Revenue Service. This could reduce the size of one's taxable estate.
In addition, a person might want to consider giving gifts to their loved ones annually, to take advantage of the $15,000 federal gift tax exclusion. This will also lower the size of one's taxable estate. Similarly, a person can pay for a loved one's college tuition or pay a loved one's medical bills. There is no limit on how much a person can pay in tuition or medical bills, but these payments must be made to the university or medical provider itself, rather than simply giving their loved ones these funds directly.
These are only some ways that one can reduce the size of their taxable estate in light of the new federal tax laws. One's estate plan should reflect these changes, so that it still meets one's wishes. Most people want to be able to have their loved ones inherit as much as possible. And, making sure they will not be subject to the federal estate and gift tax may be one way to accomplish this. In the end, though, it is important that a person seeks legal guidance in estate and gift tax planning. They can fully understand how the new laws will apply to them.