Significant changes were made to the federal estate and gift tax laws as part of the comprehensive tax package enacted by Congress late last year. Principal among these changes was the increase in the gift, estate and generation skipping exclusion amounts to $5,000,000 per individual or $10,000,000 per couple. Another significant change permits a surviving spouse to apply any unused exclusion amount of a predeceasing spouse – the so-called “portability” option.
The effect of these provisions warrants a review of all estate plans. All wills should be reviewed to consider the effect of the larger exclusion amount on formula bequests which are based on an exclusion amount. Additionally, married couples should consider whether or not to change their wills to provide outright bequests to the surviving spouse in view of the new portability option.
Wealthier clients also should consider, as part of their overall estate plan, whether to make use of the expanded gift tax exclusion to transfer property expected to appreciate or produce significant income.
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