Georgia residents can implement certain estate planning strategies to take advantage of the 2017 Tax Cuts and Jobs Act. The legislation allows taxpayers to transfer an extraordinary sum of money without being assessed federal generation-skipping transfer, gift or estate taxes.
The legislation, which went into effect on Jan. 1, 2018, doubles the exemption amounts for federal GST, gift and estate taxes. Single individuals can now gift up to $11,180,000 without having to pay any of the three taxes while married couples are allowed to gift up to $22,360,000 tax-free. Both amounts include annual inflation increases.
Taxpayers have until Jan. 1, 2026, to take advantage of the exemptions. On that date, the federal estate, GST and gift exemptions will go back to what they were for 2017. In that year, a single individual could claim up to $5,490,000 in exemptions while the exemption limit for married couples was $10,980,000.
One estate planning strategy to get the full benefits of the new tax legislation is to use trusts when gifting assets. If assets are gifted directly to the beneficiary, they could be exposed to collections by the beneficiary’s creditors. However, assets that are gifted through trusts are protected from the beneficiary’s creditors and cannot be claimed by the beneficiary’s spouse if a divorce occurs. Using a trust for gifting also allows the grantor to specify how the assets are to be controlled and used in the future; with the use of the GST exemption, it provides a shelter from any future federal estate, gift or GST taxes.
An attorney may assist clients in developing an estate planning strategy to protect assets, reduce estate or gift taxes and allow assets to bypass the probate process. Clients may be advised of the different types of wills and trusts available to accomplish their goals.