Federal tax legislation to dramatically change federal estate tax exemptions

Reported in Forbes/Personal Finance on December 21, 2017, it appears that the final Tax Bill passed by Congress, currently awaiting the President’s signature, will have dramatic effects on federal estate tax exemptions.  According to Forbes, the new Tax Bill passed by the House and Senate on December 20, 2017 will temporarily double the exclusion amounts (the exemptions) for estate, gift and generation skipping taxes from the $5,000,000 base set in 2011 to a new  base for years 2018 – 2025.  This means that beginning in 2018, an individual  can shelter $11,200,000 in assets from the federal estate tax.  With the federal portability laws, this allows married couples who properly use the portability provision, to double their combined exemption amount to $22,400,000.  There is apparently a “sunset provision” that means if there is no further congressional action, the exemption amounts that are doubled will revert to the $5,000,000 base as indexed, in 2025.

Maine’s law regarding Maine estate tax exemptions equals that of the federal law.  For individuals who may be subject to estate tax in neighboring states, New Hampshire does not have an estate tax and its residents now will be subject to the new Tax Bill doubling of the exemption for the federal amounts.  Massachusetts, on the other hand, remains steadfast with its current state estate tax exclusion amount of $1,000,000; however, Massachusetts residents, from the federal perspective, will be availed of the new federal Tax Bill rates.

Even though it may seem that individuals will now be able to feel that they will never be subject to the estate tax and thus do not need basic estate planning, this will be an erroneous conclusion.

For example, Wills, Family Trusts with Pour Over Wills, Durable Powers of Attorney, and Health Care Directives while an individual is living, are necessary documents for everyone regardless of whether or not their assets are below the federal exemption dollar amounts.  Without these basic estate planning documents, individuals lose control as to where their assets go, whatever their amount, once they pass.  And while living, without Durable Powers of Attorneys and Health Care Directives, they may find themselves in costly Probate Court matters trying to obtain guardianships to make decisions for loved ones who are unable to make decisions for themselves.

The estate planning attorneys at Libby O’Brien Kingsley & Champion are ready to provide assistance to all families with these basic planning documents so that you can rest assured, and ease your mind, that you and your loved ones will be cared for in the event of illness, dementia and Alzheimer’s issues, as well as caring for one’s family after they die.  Please feel free to contact our estate planning attorneys for further discussion of these issues.

Photo of Brian Champion in a dark suit in a law office

Brian L. Champion

Brian L. Champion is admitted to practice in the state and federal courts of Maine, New Hampshire, Massachusetts, and the District of Columbia in Washington D.C.  He is also admitted to The First Circuit Court of Appeals and The United States Supreme Court. Trusts & Estates:  Mr. Champion believes that the caring for one’s family… Read more »