The Internal Revenue Service announced today the official estate and gift tax limits for 2019: The estate and gift tax exemption is $11.4 million per individual, up from $11.18 million in 2018. That means an individual can leave $11.4 million to heirs and pay no federal estate or gift tax, while a married couple will be able to shield $22.8 million. The annual gift exclusion amount remains the same at $15,000.
Forbes’ recent article, “IRS Announces Higher 2019 Estate And Gift Tax Limits,” explains that for the very rich, these new estate and gift tax limits are planning opportunities.
For the rest of us, they’re a reminder that even if you don’t have a taxable estate, you still need an estate plan.
The Trump tax cuts severely reduced the number of estates that will be subject to the federal estate tax this year. The tax reform doubles the exemption amount from a base level of $5 million per person.
There were just about 1,890 taxable estates in 2018, according to the Tax Policy Center, compared to 4,687 taxable estates in 2013 with a base $5 million exemption. There were 52,000 taxable estates in 2000, when the exemption was $675,000.
An unlimited marital deduction lets you leave all or part of your assets to your surviving spouse free of federal estate tax. However, to use your late spouse’s unused exemption (known as “portability”), you must elect it on the estate tax return of the first spouse to die—even when no tax is due. The issue is, if you don’t know what portability is and how to elect it, you could be surprised with a huge federal estate tax bill. That should be part of your conversation with your estate planning attorney.
If you live in one of the 17 states or DC that impose separate estate and/or inheritance taxes, there’s even more at risk. Death taxes sometimes start with the first dollar of an estate.
Several states planned to match the federal exemption amount for 2018. However, state legislators thought that the new doubled estate and gift tax exemption was just too high.
Most states haven’t released their inflation-adjusted numbers yet for 2019.
Speak to our estate planning attorneys to learn if or how the estate and gift tax limits affect you.