As we turn the page and bid farewell to 2018, we look forward to 2019. There are a few changes for 2019. Going into 2018, there were many changes because of a new tax law, commonly known as the Tax Cuts and Jobs Act, which impacted both the estate tax and the income tax. But there are few changes heading into 2019. It appears things are relatively stable, taxwise, at least for now. Of course, the estate and personal income tax portions of the Tax Cuts and Jobs Act still are set to sunset, but not until the end of 2025.
Estate Tax Exemption Level
For 2019, the exclusion increased nearly 2%, from $11.18 million in 2018 to $11.4 million in 2019. That’s an increase of $220,000. Of course, the new amount is for estate and gift, as well as GST purposes. The present interest annual exclusion for gifts remains unchanged at $15,000 for 2019. Typically, that exclusion only adjusts every few years because it only adjusts in $1,000 increments.
Income Taxes for Individuals and Married Couples
On the income tax front, the brackets and standard deductions increased slightly. For example, the standard deduction for an individual increased from $12,000 in 2018 to $12,200 in 2019. The standard deduction for a married couple filing jointly increased from $24,000 to $24,400.
The Clawback and Veterans Benefits
Perhaps the two biggest changes occurring in 2018 are regulatory ones. First, Treasury proposed modifying Treas. Reg. 20.2010-1 to eliminate the “clawback.” As we know, the TCJA temporarily doubled the estate and gift tax exclusion for years 2018 through 2025. The exclusion then reverts to $5 million (inflation-adjusted from 2011). But what happens to someone who gives away their doubled exclusion before 2026 and then dies after the sunset of the doubled amount? Some thought a taxpayer dying after 2025 might be taxed for gifts made during the years of temporary doubling which exceed the reduced exclusion after the sunset. The proposed modifications would eliminate that concern.
Finally, effective in October 2018 the VA established new rules for Aid and Attendance benefits. The rules create a bright line net worth test and establish a 3-year lookback for asset transfers with a transfer penalty of up to 5 years. Prior to the new rules, there had been no penalty for asset transfers even immediately prior to application.
If you have questions about these or any other estate planning matters, call the attorneys at Gaughan & Connealy at (913) 262-2000 or RSVP for an educational workshop at www.MidwestEstatePlan.com/workshops.
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