Are estate has grown in the past decade, and we might be approaching the credit amount allowed for families. What is the current amount we (my wife and I) can pass without the kids paying estate taxes? We know that President Trump has talked about getting rid of estate taxes and just going to capital gains.
Is that good or bad for us?
– Feeling Taxed.
Dear Feeling Taxed:
This time of year, everyone gets to feeling over taxed – both literally and figuratively. A combined hangover from winter and tax payment time.
The current five million four hundred and ninety-thousand per person – so double that for you and a spouse. As of 2010, the tax law also states if you die and don’t use your credit because you passed everything to your spouse upon death, your spouse can claim your unused credit effectively doubling his or her exemption. The caveat here is you need to file an estate tax return and request this credit be moved to you within nine months of your date of death, even if they receive your entire estate. No need to do this if your estate is under the five million four hundred ninety-four thousand total, but make sure you have room for growth as typically one spouse will outlive the other by fourteen years.
That’s a lot of time for the estate to grow – especially if we have a decade like we just had.
Under this 2010 law, your heirs also receive a stepped-up basis in your property upon your death, meaning the property is appraised at the time of death and this value is used for the heir’s new value. If they sell these assets after your death for the same value, they would not incur capital gains taxes as you would have had you sold them during your lifetime.
There’s been a lot of talk about waiting to do estate planning until President Trump pushes through new tax reform on income taxes, corporate taxes, and estate taxes.
On the outside, it sounds like a magnificent idea. However, before he was going to lower the top income tax bracket to thirty-three percent, he had to come up with some budget cuts so that we remained budget neutral. Otherwise, it’s going to be tough to get these tax cuts passed.
To do this, he plans to abolish Obamacare saving billions of dollars, he intends to lower the budgets for Health and Human Services (HHS) by fifteen percent, and he has slashed budgets for the IRS as well as hundreds of other cuts.
The HHS is made up of Medicare, Medicaid, and Social Security and attempts to reduce payments there might run into some real debate, especially with older voting Americans.
Everyone loves a reduction in costs, as long as it doesn’t take anything away from them. Backlash came from many republican senators over the recent attempt to abolish the ACA.
The cuts made to IRS and other departments might be in order except that IRS’s budget cuts are a little strange considering IRS returns four dollars for every dollar spent. The chance of being audited have dropped from four to five percent to less than one percent because the IRS simply does not have the personnel to do audits.
This may mean even more future identity theft and falsified returns, already crimes costing billions of dollars to U.S. coffers.
President Trump needed all of these things to fall in order as he proposed them via presidential decree – Obamacare, budget cuts, HHS, etc., to justify his final proposal for a reduction in taxes.
He’s not off to the start he was hoping for, and to assume a huge tax cut coming your way in the very near future may be wishful thinking, as long as people are opposed to cuts in programs such as Social Security, Medicare, Medicaid and all items listed.