The Tax Cuts and Jobs Act of 2017 increased the tax exclusion for gifts made during a person's life as well as estates left after death. People can give up to $11.4 million in property value, assets or other objects of value without having taxes assessed on their estate. Many observers believe this exemption may not last past 2025, which means the clock may be ticking.
Taxes are generally assessed on the change in value since a person acquired it. A house that was bought for $200,000, which would be called the basis in the profit equation, may now be worth $1 million. If that is the case, an owner would be liable for tax on $800,000 in profit if it is sold at the new value or left in a will to an inheritor.
When it comes time to consider how this exemption is useful, people should consider what assets are likely to be retained by the beneficiaries and not sold off. There are many options here, like an outright gift or a trust. A gift may mean trouble if a person wants to keep using those assets, so a person may consider a qualified personal residence trust (QPRT), which allows a previous owner to keep using a property after setting it up.
Questions about estate planning and how people can save value for their children and beneficiaries are often best referred to an attorney. Legal representation while drafting a will or considering gifts to reduce tax liability often saves time and certainly saves the stress of insecurity at a very important time.