Impact of the Tax Law on Estate Planning

by Kramer Levin Naftalis & Frankel LLP

Kramer Levin Naftalis & Frankel LLP

President Trump signed sweeping tax legislation into law on Dec. 22, 2017, resulting in several significant changes to the wealth transfer tax system, effective as of Jan. 1, 2018.

This Alert highlights the provisions of the new tax law that directly relate to estate planning and, more importantly, focuses on how the new law may impact you and your estate plan.

Estate Tax

  • The estate tax exemption amount is doubled. In 2018, each individual has an exemption from the federal estate tax of approximately $11,200,000, which will be adjusted annually for inflation. This increased exemption amount is effective Jan. 1, 2018, through Dec. 31, 2025 (at which time the exemption is slated to return to the 2017 amount).
  • The top federal estate tax rate remains at 40% on assets in excess of the exemption.
  • A deceased spouse’s unused exemption at death remains portable to his or her surviving spouse.
  • Stepped-up (-down) income tax basis under Section 1014 remains.
  • There is no repeal of the estate tax. As noted above, on Jan. 1, 2026, the federal estate tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

Gift Tax

  • The gift tax exemption amount is doubled. In 2018, each individual has an exemption from the federal gift tax of approximately $11,200,000, which will be adjusted annually for inflation.
  • The top federal gift tax rate remains at 40% for lifetime taxable transfers made in excess of the exemption.
  • The annual exclusion amount has increased to $15,000 (and will continue to be adjusted annually for inflation).
  • There is no repeal of the gift tax. On Jan. 1, 2026, the federal gift tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

Generation-Skipping Transfer (“GST”) Tax

  • The GST tax exemption amount is doubled. In 2018, each individual has an exemption from the federal GST tax of approximately $11,200,000, which will be adjusted annually for inflation.
  • The top federal GST tax rate remains at 40% on generation-skipping transfers of assets in excess of the exemption.
  • There is no repeal of the GST tax. On Jan. 1, 2026, the federal GST tax exemption amount is slated to decrease to the 2017 level, adjusted for inflation.

How The New Tax Law May Affect Your Estate Planning:

Unanticipated Impact on Existing Documents

The increased exemptions may result in unintended testamentary dispositions, therefore requiring important immediate changes to your existing documents.  Your documents may create trusts that are to be funded according to formula clauses tied to the exemption amount in effect on your date of death.  If your death occurs before 2026, the new law may cause these trusts to be funded with significantly larger amounts than you were anticipating when the documents were signed.  Therefore, we recommend that, at the very least, you review the terms of your existing wills or revocable trusts and call us to discuss your existing estate plan so that we may assist you in determining whether revisions are necessary.

Temporary Planning Opportunity Using the Increased Exemptions 

As mentioned above, the new record high exemption amounts are temporary and are slated to decrease significantly in 2026.  Therefore, you have a limited window of time in which to take advantage of this rare opportunity to transfer substantial amounts of wealth to future generations without incurring any transfer tax liability.

If, by Dec. 31, 2017, you already used your entire federal exemptions, you now have approximately an additional $5,600,000 of exemption to use (or, as a married couple, approximately an additional $11,200,000).  As an added benefit, by engaging in lifetime gifting, you will also decrease your taxable estate for state estate tax purposes as many states, including New York, will continue to have an estate tax exemption that is significantly less than the new federal exemption.

Income Tax Planning

Given the large exemption amounts now available and the fact that income tax basis rules are not changing, there may be more opportunity to plan for the reduction or elimination of income taxes on appreciated assets upon death. 

State Estate Taxes

The larger disparity created by the new tax law between many state estate tax exemption amounts and the new federal exemption amount has generated an important reason to engage in estate tax planning, as this disparity may result in a large state estate tax upon your death (depending upon the formula clause in your documents).

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Kramer Levin Naftalis & Frankel LLP | Attorney Advertising

Written by:

Kramer Levin Naftalis & Frankel LLP

Kramer Levin Naftalis & Frankel LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.