The amount you can leave to heirs without facing federal estate tax is projected to top $11 million per couple in 2018--$5.6 million per person, according to Bloomberg BNA estimates, based on recently released inflation numbers. And the annual gift tax exclusion amount is projected to increase for the first time since 2013—to $15,000 for 2018.
These numbers matter to estate planners and their wealthy clients who try to whittle down their estates to keep below the threshold and avoid the 40% federal estate tax by transferring wealth to future generations and charity.
The federal estate tax exclusion for 2017 deaths is $5.49 million per person, so just shy of $11 million per couple. It’s been creeping up because it’s adjusted for inflation since 2011 when the base level was set at $5 million.
The annual exclusion amount for gifts has been $14,000 for 2013 through 2017. If you make lifetime gifts over that amount, they count against the estate tax exemption amount, which is actually a combined estate/lifetime gift exclusion amount.
What the rich are really interested in is the prospects of estate tax repeal.
President Trump’s tax plan outline released in April and the House GOP Blueprint both call for the elimination of the estate tax, but Democrats say they won’t play along with any tax cuts on the 1%.
In Senate Finance Committee hearings yesterday on individual tax reform, Sen. Ron Wyden decried Trump’s plan to abolish the estate tax, calling it “another outlandish giveaway to people at the top” in his opening statement.
Lily Batchelder, professor of law and public policy at the NYU School of Law described the estate tax as one of the most important features of the tax system to reduce inequality in her testimony.
Meanwhile the anti-death-tax campaign is in full swing.
Some 150 organizations signed a Family Business Coalition letter this week to the tax writing leaders pleading for full and permanent repeal of the estate tax. And witness the down-on-the-ranch videos in a campaign by Cattlemen for Tax Reform: rancher Jay Wolf of Nebraska on how the estate tax and rising land values threaten his wish to keep his ranch intact for the fourth generation, and rancher Kevin Kester of California on how his family had to scrape by to pay $2 million in estate taxes when his grandfather died and how figuring out how to pass the ranch on to the 6th generation without selling parts of it is “the greatest challenge that keeps [him] up at night.”
Is estate tax repeal on the horizon?
Expect a long slog. Sen. Orrin Hatch called yesterday’s hearing the first in a series leading up to “an intensive effort” to draft legislation.
It’s not like this hasn’t all been hashed out—since he became the lead Republican on the Senate Finance Committee in 2011, they’ve held more than 60 hearings where tax reform was the focus of discussion.
