What to know about estate taxes in 2018

In 2018, residents of North Carolina, along with the rest of the country, will have a $5.6 million federal estate tax exemption. This is an increase from $5.49 million in 2017. Couples may choose to combine their individual exemptions, which means that they have a total exemption of $11.2 million. However, couples will need to tell the IRS that this is what they want to do.

The gift tax exemption was $14,000 in 2017, and it will go up to $15,000 in 2018. These increases are linked to inflation, and the gift tax exemption amount will go up for the first time since 2013. If the current administration has its way, the estate tax may be eliminated. However, it is likely that such a proposal will be scrapped in favor of lower tax rates for individuals and businesses.

Those who need to get under the exemption limit may accomplish that goal by giving gifts or contributing more to dynasty or other trusts. It may also be a good idea to take advantage of the higher gift tax exemption. It is important to note that the limit applies per gift and that there is no limit to how many $15,000 gifts that can be made in a given year.

Taking advantage of tax exemptions may leave more for beneficiaries after a person passes. Creating trusts, making gifts and other tactics may be available to help a person stay under the amount exempted by law. Trusts may be especially appealing because they may make it possible to use or generate income from an asset while also keeping it outside of an estate. Speaking with an attorney or a financial adviser may make it easier to create a strategy that reduces a person’s estate tax burden.