In December 2017 President Trump signed the Tax Cuts and Jobs Act. This reform impacts different financial and tax planning areas, particularly estate planning. What does this mean for your estate plan in Illinois?
Changes to the estate tax exemption
The estate tax exemption changed starting in 2018. In 2023, the estate tax exemption is $12.92 million for an individual. This means that you won’t have to pay federal estate taxes on any amounts under that limit when you give it as a gift to an heir during your lifetime or leave it to them upon your death. It removes federal estate tax for anyone besides the wealthiest individuals.
It’s important to note that the rules under this act are supposed to expire at the end of 2025. They’ll likely revert to the previous levels, though they’ll be adjusted to account for inflation.
Regarding the generation-skipping tax, the rate exemption now is also set at $12.92 million for individuals, and it will expire at the end of 2025. This is great news for people who plan to skip a generation when they gift part or all of their estate to someone in their family.
Greater amounts of gifts for estate tax exemption
Overall, this temporary exemption increase for federal estate tax and generation-skipping tax is ideal for many people. They’ll be able to give more of their estate to heirs and avoid paying estate taxes on the value amounts. Even though there are benefits to those giving to heirs and the beneficiaries, it’s important to conduct estate planning carefully.