United States: Dramatic Change To Federal Estate, Gift And Generation-Skipping Tax Exemptions

  • Each individual's exemptions from federal estate, gift and GST taxes have roughly doubled to approximately $11,200,000
  • The increased exemptions are available only temporarily, through 2025
  • We recommend that you review the terms of your existing estate plan and consider additional tax-free gifts

Individuals Have New, Exciting Opportunity to Make Large Gifts to Benefit Their Families and Reduce Estate Tax

The Tax Cuts and Jobs Act (the "Act"), which took effect on January 1, 2018, is the most comprehensive update to the Internal Revenue Code in decades. In addition to making sweeping changes to the federal income tax laws, the Act makes significant, albeit temporary, changes to the federal estate, gift and generation-skipping transfer (GST) tax laws.

Federal Estate, Gift and GST Tax Exemption Amounts Double

Under the Act, each individual's exemptions from federal estate, gift and GST taxes have roughly doubled, from $5,490,000 ($10,980,000 for a married couple) in 2017 to approximately $11,200,000 ($22,400,000 for a married couple) in 2018. The exemptions are scheduled to further increase with inflation for each year through 2025.

Absent further changes to the tax law, the increased exemptions are available only temporarily, through 2025. On January 1, 2026, the exemptions are scheduled to revert to 2017 levels, indexed for inflation. (Some practitioners have asked whether lifetime gifts in the amount of the increased exemptions made prior to 2026 will be subject to tax if the exemptions are subsequently reduced. While this seems unlikely, it remains an open question.)

Wealthy individuals can take advantage of the increased exemption currently by making lifetime gifts to their children and more remote descendants (or other family and friends), or to trusts for their benefit. Selecting the optimal property to transfer is critically important. Factors, such as whether valuation discounts can be taken, the prospects for appreciation in the property and the income tax basis in the property, should all be considered. Techniques, such as gifts and sales to intentionally defective grantor trusts, as well as grantor-retained annuity trusts, which preserve the use of the valuable gift and estate tax exemptions, remain viable. Forgiving family indebtedness may also be attractive in light of the increased exemption amounts.

Impact on Individuals and Families

The increased federal estate, gift and GST tax exemptions will have an important impact on many individuals and families:

  • In light of the dramatic increase in the estate and GST tax exemptions, we strongly recommend that you review the terms of your existing estate plan to ensure that the provisions in your documents are still in line with your current wishes. For instance, your will, lifetime trusts or even beneficiary designations may provide for disposition of an amount based on the estate or GST tax exemption in effect at your death, and you may wish to consider whether such a provision would result in "overfunding" the disposition in the event of death prior to 2026. In some cases, it may be possible to simplify your plan as a result of the increased exemption. In all cases, flexibility should be built into your estate-planning documents to anticipate both the expiration and the extension of the federal tax law changes, as well as the possible enactment of related state tax law changes.
  • As a result of the increased exemptions, fewer estates will be subject to federal estate tax, at least until 2025. Income tax planning—specifically, planning to ensure that appreciated assets will benefit from having income tax basis stepped up to fair market value at death—will likely become the highest priority for individuals with nontaxable estates. If this is your situation, you may wish to review, and possibly unwind, certain estate-planning transactions that you have undertaken in the past.
  • As discussed above, given the temporary increase in the gift and GST tax exemptions, you now have a window of opportunity to make large, tax-free gifts to your children and more remote descendants (or other family and friends), or to trusts for their benefit.

Tax Rates Unchanged and Step-Up in Basis on Death Preserved

The highest marginal federal estate and gift tax rates remain unchanged at 40 percent, and the GST tax rate remains unchanged at a flat 40 percent. The new law also preserves the step up in income tax basis for assets owned at death.

Gift Tax Annual Exclusion Increases

In addition to the higher lifetime exemptions, the amount that can be given tax-free pursuant to the so called "annual exclusion" has increased from $14,000 in 2017 to $15,000 in 2018 as a result of inflation adjustments. In other words, individuals can now give $15,000 per year, and married couples can give $30,000 per year, to all of their children and grandchildren or anyone else without using any part of their valuable gift tax exemption.

State Tax Law

In reviewing your existing estate plan and evaluating gifting options, you should bear in mind any applicable state estate and gift tax laws. As an example, for a New York resident, the state estate tax exemption is currently $5,250,000 and is scheduled to increase in 2019, but only to the pre-Act federal exemption amount. The benefit of the New York estate tax exemption phases out abruptly once the value of the taxable estate exceeds the amount of the exemption. As a result of this estate tax "cliff," the entire taxable estate is subject to New York estate tax at graduated rates up to a maximum of 16 percent. Since the federal estate tax exemption is now much higher than the New York exemption, many New York estates that are not subject to federal estate tax will be subject to substantial New York estate tax. Steps that can be taken to minimize this result may include lifetime gifting (New York imposes no gift or GST tax) to reduce the taxable estate. Impending changes in state tax laws should certainly be monitored.


This is a high-level summary of the federal estate, gift and GST tax changes brought about by the new law. Individual circumstances will determine what kind of planning is warranted as a result of these changes. We encourage you to contact us to discuss how these changes impact your estate planning.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Dickinson Wright PLLC
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Dickinson Wright PLLC
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions