Background

On December 22, 2017, President Trump enacted the Tax Cuts and Jobs Act, (“TCJA”) ushering in significant changes to the federal estate, gift and generation-skipping transfer tax laws.  Through December 31, 2017, the federal estate, gift and GST tax exemption amounts were $5,490,000 for an individual and $10,980,000 for married couples.  Effective January 1, 2018, the federal estate, gift and GST tax exemption amounts jumped to $11,180,000 for an individual and $22,360,000 for married couples.

Under the new law, these exemptions will be adjusted annually for inflation, beginning in 2019.  However, absent further congressional action, the new tax exemption amounts are scheduled to revert to the pre-TCJA amounts (indexed upwards for inflation) on January 1, 2026. This will effectively slice the new tax exemption amounts in half.  The highest federal estate, gift and GST tax rates remain at 40%.

Portability

The TCJA retains portability of the federal estate tax exemption.  “Portability” permits a surviving spouse to add the unused federal estate tax exemption amount of the deceased spouse to his or her own.  New York law does not allow for portability.

Annual Gift Tax Exclusion Amount

In addition to the increase in the tax exemption amounts, the annual gift tax exclusion amount rose from $14,000 in 2017 to $15,000 in 2018.  Married couples may gift up to $30,000 per recipient.  This increase is the result of an adjustment for inflation, not the TCJA.

New York Estate Tax Exemption Amount

The New York estate tax exemption amount continues to be $5,250,000 for an individual and will increase on January 1, 2019 to $5,600,000.  The maximum New York estate tax rate remains at 16% without a reduction.