There are a few changes for 2019. Going into 2018, there were many changes because of a new tax law, commonly known as the Tax Cuts and Jobs Act, which impacted both the estate tax and the income tax. But, there are few changes heading into 2019. It appears things are relatively stable, taxwise, at least for now. Of course, the estate and personal income tax portions of the Tax Cuts and Jobs Act still are set to sunset, but not until the end of 2025.
For 2019, the exclusion increased nearly 2%, from $11.18 million in 2018 to $11.4 million in 2019. That’s an increase of $220,000. Of course, the new amount is for estate and gift, as well as GST purposes. The present interest annual exclusion for gifts remains unchanged at $15,000 for 2019. Typically, that exclusion only adjusts every few years because it only adjusts in $1,000 increments.
On the income tax front, the brackets and standard deductions increased slightly. For example, the standard deduction for an individual increased from $12,000 in 2018 to $12,200 in 2019. The standard deduction for a married couple filing jointly increased from $24,000 to $24,400.
Perhaps the two biggest changes occurring in 2018 are regulatory ones. First, Treasury proposed modifying Treas. Reg. 20.2010-1 to eliminate the “clawback.” As we know, the TCJA temporarily doubled the estate and gift tax exclusion for years 2018 through 2025.
The exclusion then reverts to $5 million (inflation-adjusted from 2011). But, what happens to someone who gives away their doubled exclusion before 2026 and then dies after the sunset of the doubled amount? Some thought a taxpayer dying after 2025 might be taxed for gifts made during the years of temporary doubling which exceed the reduced exclusion after the sunset. The proposed modifications would eliminate that concern.
Finally, effective in October 2018 the VA established new rules for Aid and Attendance benefits. The rules create a bright line net worth test and establish a 3-year lookback for asset transfers with a transfer penalty of up to 5 years. Prior to the new rules, there had been no penalty for asset transfers even immediately prior to application.
Happy New Year!!
I hope all of you have a wonderful holiday season. If you are travelling to see loved ones, I hope your travels are safe and easy. I hope you all have a great, prosperous 2019 filled with hope and joy!
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128