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Estate and Gift Tax Thresholds Set to Increase for 2018

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Estate and gift tax thresholds for 2018

Near the end of each year (usually in October) the Internal Revenue Service updates a number of inflation-adjusted income, estate and gift tax figures for the upcoming year. Well before the official figures are released, though, some private groups usually can predict the next years’ changes. We already know the estate and gift tax thresholds for 2018, though not officially.

For 2018 the figures for several important estate and gift tax numbers will change, and Bloomberg BNA has projections about a host of those numbers. Also covered in the Bloomberg BNA report are projected income tax changes, but those are both harder to explain and (usually) of less significance for planning. Besides that, all of the updated figures are subject to the possibility of Congressional changes — though the future of tax reform in the Congress is far from clear at this point.

Estate tax thresholds

For 2017, the federal estate tax kicked in at $5.49 million dollars. In other words, a decedent dying this year with an estate of less than that figure would be liable for no federal estate tax. State estate tax thresholds sometimes follow the federal figure, though they usually do not. Arizona addresses that problem by simply not having a state estate tax at all.

The current figure means that a married couple can have up to $10.98 million if they both die this year. Above that amount they might have to pay at least some federal estate tax. The figure for the first spouse to die is the amount for the year of their death. Also, a federal estate tax return must be filed for that first spouse to take advantage of the doubled exemption.

Of course there are other complications to review before fixing on that $10.98 million figure for 2017. Did either spouse make large enough gifts during life that they were required to file a gift tax return? If so, the maximum figure might be reduced. Though it is usually an oversimplification to say that a married couple can have $10.98 million without worrying about federal estate taxes, that is not far off.

Changes for 2018

Now we get word from Bloomberg BNA that the 2018 figure will go up substantially. It will probably reach $5.6 million for a single person. That would mean $11.2 million for a married couple. There are probably not a lot of people with assets between the old and new figures. Still, the increase will provide an additional measure of comfort to the 99%+ of us who have accumulated wealth of less than the federal estate tax exemption amount.

By the way, the increase to $5.6 million applies to Generation Skipping Transfer Tax thresholds, as well. That means that an individual can leave up to the new, higher in trust for grandchildren and later generations without worrying about incurring an additional tax liability. But note: the amounts are not cumulative — the same $5.6 million can use up both the estate tax and the generation-skipping tax exclusion amounts.

Gift tax increases

Almost everyone understands that an individual can give up to $14,000 to another person without incurring any gift tax liability. A few people may have some distant memory of the figure being just $3,000 (it was set at that level from 1942 until 1981). Others might think it is $10,000 (that was the number from 1982 to 2001). Curious about the changes? There’s a handy chart available online showing the figures for years up until 2014.

As the chart indicates, the gift tax exclusion amount has been $14,000 per year since 2013. Next year it is will increase to $15,000, according to Bloomberg BNA.

Note that the the gift tax exclusion amount only increases when the inflation adjustment would change the figure by $1,000. That means that the $15,000 figure will probably be effective for several years. The last increase, for example, lasted for five low-inflation years.

Taking maximum benefit of gift tax rules

Remember that the annual gift tax exclusion amount can be doubled for married couples. It also applies to each recipient. In other words, a couple can give twice the exclusion amount to each child. They can also add in-laws, grandchildren and others to the recipient list.

Gift tax rules are confusing. The federal government has not mandated that gifts over $15,000 ($14,000 until the 2018 change) are prohibited, or even taxed. It’s just that a gift tax return has to be filed for larger gifts.

Although a gift tax return may be required, it is unlikely that any gift tax will be due. Estate and gift tax thresholds are interrelated. Remember that $5.6 million estate tax exemption amount? That’s both an estate and a gift tax threshold figure.

Once an individual exceeds the $15,000 annual gift tax exclusion amount, they begin to use up their $5.6 million lifetime exemption amount. In other words, if you make a $100,000 gift to your daughter (lucky her!), the first $15,000 will be consequence-free. The remaining $85,000 will reduce your $5.6 million estate tax exemption to $5.515 million.

In addition to estate and gift tax thresholds

A host of other tax-related figures will change in 2018, too. That’s part of the fun of learning the federal tax system. Just when you get one years’ numbers memorized — they change. This year may see even more changes, as Congress debates possible tax reform measures.

In the meantime, your estate planning probably will not depend much on the federal (or, in Arizona, state) estate and gift tax thresholds. That’s because they have risen to the point that few people are much affected. Still, the new higher numbers will give some people more flexibility for their planning.


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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.