Asset Planning Update


Asset Planning Update

Estate Planning – Asset Protection – Business Succession

2018 Estate and Gift Tax Changes Create Good News-Bad News Scenarios

Estate and gift taxes always worry our clients—especially when the laws change. The numbers for these taxes have indeed changed for 2018, so a new-year review is wise. The amounts of your estate that are excluded from taxes keep going up. However, if you happen to be among the unlucky, this can be a double-edged sword. Here are some examples of estate tax changes effective in 2018.

Federal Highlights

  • You can transfer $11.18 million of your estate without tax ($22.36 million for married couples). Transfers can be by gift, by will, or by a combination of the two. The maximum rate on the portion above this level is 40 percent, but the average rate paid is about 16 percent.
  • The annual gift tax exclusion (the amount you can give each year without even having to report to the IRS) is now $15,000 per beneficiary. If you give more than $15,000 to the same person, you have to report the gift to the IRS, but you don’t have to pay any tax until you pass the $11.18 million figure in your lifetime. You can still make gifts to pay for others’ education and medical costs without any limit, if you follow IRS rules.

State Highlights

  • In Maryland, the first $4 million of your estate will not be taxed ($8 million for married couples). The maximum tax rate on the portion above this level remains at 16 percent, but— as with the federal tax—the average rate is less. Maryland’s inheritance tax, which is assessed on bequests to people outside your immediate family and descendants, stays at 10 percent, but the tax will be subtracted from any Maryland estate tax you pay.
  • The District of Columbia’s estate tax exemption increases to $5.6 million ($11.2 million for married couples). The top rate stays at 16 percent.
  • Virginia continues to have no estate or inheritance tax.

Beware the Bad News

Back when the federal tax exclusion was well under $1 million, wills with trusts were designed to reduce the tax bite. Today, with much larger amounts being excluded, some of these trusts can backfire:

  • The trusts can result in the surviving spouse receiving nothing while large amounts are held for future use by the children.
  • They can also result in assessment of capital gains taxes at a 20 percent rate, even if no estate taxes are owed. A disclaimer trust could be used to address these issues. This trust allows the surviving spouse up to nine months in which to consult with advisors to determine what course is best. The disclaimer trust avoids the risk of being locked into the terms of an old trust and still allows for maximum tax savings.

Time for a Look

We recommend that all of our clients review their estate planning documents every two to three years, or whenever there is a significant change in their circumstances or in the law.

If you already have estate planning documents in place, now is the time to pull them out and review them. If you haven’t thought about estate planning at all, there’s no time like the present to start. You never know what life will throw at you, so it’s always best to ensure that your intentions are clear, documented, and carried out.

Finally, if your estate exceeds the federal or state tax exemptions, there are still many vehicles that can be employed to minimize or even eliminate your estate tax. But you need to work with professionals. (Case in point: We recently reduced the tax exposure of one client by more than $1 million. That is money that can now go to his children.)

We make working on your estate planning as timely and painless as possible. Just contact Brian Hundertmark at Garson Law LLC for expert advice and a helping hand: (301) 280-2700 and

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