It’s an old joke, but one worth re-telling:
Doctor (on the phone): I have bad news and worse news.
Patient: Goodness! What’s the bad news?
Doctor: I got your test results back and you have 48 hours to live.
Patient: Well, what could be worse than that?
Doctor: I’ve been trying to reach you since yesterday.
The IRS has just announced the annual changes to some figures that are important for clients who might be anticipating a federal estate tax liability at death or a federal gift tax during their lifetime.
Now taxpayers who plan making gifts during 2018 do not have to pay gift tax, or even file a gift tax return, on the first $15,000 of a present interest given to anyone during the calendar year. This is an increase from this year’s $14,000 annual exclusion amount per donee and means that spouses can give $30,000 covered by their joint exclusions to any person, e.g. children and grand-children.
In addition, the lifetime exemption has been raised to $5,600,000 from the 2017 level of $5,490,000. This means that spouses combined exemptions will equal $11,200,000.
During life the exemption can protect from gift taxation any annual gifts made over $15,000.
But, in order to use part of the exemption to protect the excess gift value a gift tax return must be filed. Any used exemption amount remaining at death can protect from federal estate tax those assets left to heirs.
The IRS estimates that less than 5% of all estates are subject to the federal tax – so why worry and why monkey with all of this if none within your clientele are wealthy?
Just like the patient above who would have appreciated good news from his doctor, your clients want to hear good news from you. And it is good news to be assured that the federal tax hammer will not nail them at death or when gifts are made during life – but true assurance comes from a good explanation.