Maui residents who are planning their estates, or looking to make changes, will need to be aware of important changes to the federal gift and estate tax laws.
Gift Tax Annual Exclusion. The gift tax “annual exclusion” is a threshold amount used to determine whether gifts made during one’s lifetime need to be reported to the IRS. This provision was not changed for U. S. citizens making gifts, and continues to be set at $15,000 per donee per year.
Applicable Exclusion Amount. This figure is used to determine whether federal gift tax is payable, or upon death whether an Estate Tax Return must be filed and estate taxes paid. Commencing as of January 1, 2019, the applicable exclusion amount was increased under the Tax Cuts and Jobs Act from $11.18 million to $11.4 million for each donor. Therefore, for example, with proper planning, a married couple may be able to pass up to $22.8 million of value without being subject to estate taxes.
Hawaii’s estate tax applicable exclusion amount remains unchanged at $5.49 million.
Generation Skipping Tax Exemption. The generation skipping tax exemption is a threshold amount for determining whether generation skipping tax must be paid on gift to donees who are two or more generations from the donor. Like the applicable exclusion amount, the federal generation skipping tax exemption was also increased to $11.4 million for each donor, effective as of January 1, 2019. When used properly, this could therefore enable a married couple to pass up to $22.8 million of gifts to donees who are two or more generations in age from the donor.
Unfortunately, the provisions discussed above change regularly, and it is the provisions which are in effect at the time of a gift or transfer which govern tax consequences. As such, it would be a mistake to presume that gift, estate and generation skipping taxes can be overlooked by Maui residents as part of their estate planning process. This also means that it is always best to consult with your estate planning attorney and other advisors for assistance with understanding how these concepts work and should be considered.
NOTE: The information in this article and throughout this website is not intended, and should not under any circumstances be interpreted, as legal advice. The reader is encouraged to consult with legal counsel for assistance with any aspect of the estate planning process, and any other matter of a legal nature.