United States: Recent Changes To The Federal Estate And Gift Tax Law

January 2, 2018 - On December 22, 2017, President Trump signed into law H.R. 1, the latest tax bill, which will result in significant changes to the taxes imposed on our clients' estates and lifetime gifts, as well as personal income taxes. Below is a summary of some of those changes.

Estate and Gift Taxes

Under the new law, effective January 1, 2018, each person is granted an exemption from payment of United States gift tax and, to the extent not applied toward gift tax, United States estate tax. The exemption effectively shelters from gift or estate tax the total amount of transfers of property by a person to individuals and trusts (other than certain transfers to or in a qualifying trust for a spouse or to or in trust for one or more charitable entities) of up to an aggregate amount of $11,200,000. This exemption amount is twice the amount which would have been applicable in 2018 under the law in effect prior to passage of the new law. The exemption amount is indexed for inflation and will rise each year it is in effect.

Absent additional legislation, the new exemption amount will terminate on December 31, 2025 and revert thereafter to the unified credit amount in effect prior to enactment of the new law ($5,000,000 indexed for inflation after 2011).

For purposes of application of the exemption amount to gifts and estates, the market value of the property transferred as of the date of a gift or the date of death or other valuation date for an estate will apply.

The new law also doubles in size the exemption amount for generation skipping transfers ("GST") which may be made to persons (or trusts for the benefit of persons) who are of the same generation (or for tax purposes are deemed to be of the same generation) as a donor's grandchildren or more remote issue. The exemption amount for 2018 will be $11,200,000, the same amount as the exemption for gift and estate tax purposes, and, like the exemption amount for gift and estate tax purposes, will adjust annually for inflation. Absent additional legislation, on December 31, 2025, the generation skipping transfer tax exemption amount will revert to the level in effect prior to enactment of the new law ($5,000,000 indexed for inflation from 2011).

Taxable transfers which exceed the exemption amount then in effect will be subject to payment of tax at the rate of 40% under any of the gift tax, estate tax or generation skipping transfer tax provisions of the new law. This is the same rate as in effect for 2017.

The new law continues to provide for the "annual exclusion" for gift tax purposes. This is the amount a taxpayer can give to each individual or entity ("donee") each year without applying any of his or her federal gift tax exemption to the transfer or paying any federal gift tax on the transfer. Effective January 1, 2018, the annual gift tax exclusion amount will increase to $15,000.

It is recommended that each client review his or her current estate and lifetime gifting plan, as well as applicable current state estate tax laws, in light of the tax changes summarized above, and especially since the increased exemption amounts are temporary. Some possible adjustments that could save taxes include making additional gifts to individuals and trusts, decanting existing non-GST exempt trusts to make them partly or entirely GST exempt, selling appreciable assets to trusts, and establishing and funding spousal access trusts. These techniques, amongst others, move future appreciation of transferred assets outside of one's taxable estate thereby reducing the exposure to transfer taxes at death. The increased exemption amounts allow for greater assets (and therefore a greater amount of appreciation) to be shifted outside of the federal transfer tax system.

Personal Income Taxes

The new law changes a number of the Internal Revenue Code provisions governing income taxation of individuals. All of these changes are effective for 2018 and each future year thereafter until December 31, 2025, absent a further change in the law. After December 31, 2017, the percentage limit for allowable deductions for charitable contributions of cash to public charities has been increased to 60% of a taxpayer's adjusted gross income.

Under the former law, taxpayers could deduct certain miscellaneous itemized deductions to the extent they exceeded 2% of the taxpayer's adjusted gross income. The new law suspends all such deductions effective after Dec 31, 2017.

The deduction for home equity indebtedness is suspended effective after Dec 31, 2017. The new law also allows taxpayers with existing mortgages to continue to deduct interest on a total of $1 million of mortgage indebtedness for a first and second home, but for new buyers, the permitted deduction drops to interest on a total of $750,000 of mortgage indebtedness.

Certain business income that is taxed at the individual rates of the business owner rather than through the corporate tax structure, also known as "pass through" income, can now take advantage of a 20% deduction under the new law. Entities that produce pass through income include limited liability companies, sole proprietorships and partnerships. As a result, qualifying persons may wish to consider establishing such an entity to take advantage of this new deduction.

The new law limits the deductions allowable for state and local taxes (property and income taxes), providing an exception to this limitation that allows individuals to claim a deduction of up to $10,000 on state and local taxes which would otherwise not be allowed. This change is effective after December 31, 2017. Due to the varying nature of state and local taxes, individuals may wish to consider changing their domicile to another state with lower income taxes as well as establishing an incomplete non-grantor trust "("ING"). INGs are not permissible for New York residents. For an individual residing in a state which levies an income tax (other than New York), an ING is a trust for such individual's own benefit which avoids state income taxation on the assets held thereunder without incurring a gift tax or using any gift tax exemption on funding.

Finally, the new law will likely affect each individual's income tax rates; while it retains the existing seven tax brackets, the rates and income levels at which taxpayers will have to pay federal income taxes have changed. The law keeps the lowest bracket at a 10% rate, but reduces the highest bracket from 39.6% to 37%. This reduction applies in 2018 to single individuals and heads of household with an annual income of $500,000 or more, married couples filing jointly with a joint annual income of $600,000 or more, and married couples filing separately with individual annual incomes of $300,000 or more. The rate reduction is temporary and scheduled to return to the 2017 rates after December 31, 2025.

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
Ostrow Reisin Berk & Abrams
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Ostrow Reisin Berk & Abrams
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
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