If you want to shave down your estate tax bill in the future, consider giving away some of your fortune.
The Tax Cuts and Jobs Act increased the gift and estate tax exemption to $11.18 million per person this year. That's more than double the $5.49 million per individual limit in 2017.
This means you can transfer more than $11 million, either as a gift while you're alive or as a bequest after death, without having the amount subjected to a 40 percent tax.
Be aware that, at least for now, the tax code's generosity is a limited-time deal. The $11.18 million estate and gift tax exemption is set to expire after the end of 2025, at which point it will revert to $5.49 million – unless Congress acts.
That means that, if you want to give away large sums of your wealth so that you shrink your estate and your tax bill, now is the time to do it.
To put things into perspective, the IRS received 12,711 estate tax returns in 2017. Of these, 4,191 were submitted for gross estates valued at more than $10 million.
Estate plans are not just for the rich and famous. Anyone with assets, including a home, 401(k) plan or savings account, should think about how those possessions will be distributed one day.
Aside from gifting, a trust can be a good way to hand money down. It has the added benefit of giving you more control over how your assets are made available to the next generation.
Others may opt to give the bulk of their estate away. In that case, consider setting up a charitable remainder trust, using a donor-advised fund or simply leaving a portion of your assets to a specified charity in your will.
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