With each new year comes changes in laws that impact Estate Planning strategies. This is one of the reasons why it’s important to review and update your estate plan each year. Below is a summary of 2018 Changes that Impact Massachusetts Estate Planning.
Gift Tax Limits
For 2018, you can gift up to $15,000 per person without paying federal taxes. This is up from $14,000, a limit that had been in place since 2013. Since the gift limit applies from one person to another, you can double up if needed. For instance, a husband and wife can each gift $15,000 to the same person. The Commonwealth of Massachusetts does not have a gift tax, so you need only worry about the federal limit in 2018 changes that impact Massachusetts estate planning.
Estate Tax Limits
There is both a Federal and State threshold for estate taxes. In 2018, individuals can leave up to $5.6 million to their heirs without paying federal estate taxes. The limit for married couples is $11.2 million. There are indications that President Trump is working to eliminate the federal estate tax altogether. Even if that occurs, Massachusetts residents must still consider estate taxes charged at the state level. Massachusetts estate tax limits are much lower at $1 million per person.
Medicare Premium Increases
Medical expenses are important aspect of Massachusetts estate planning. For individuals enrolled in Medicare, premiums are expected to rise again in 2018. These come in the form of surcharges, of which there are 4 different tiers that apply. You can avoid surcharges if your modified adjusted gross income (MAGI) is less than $85,000 if single or $170,000 if married. 2016 tax returns are used to determine Medicare premiums for 2018. Since those are already filed, you can’t really change the outcome now. What you can do is prepare for future potential increases by reducing your AGI for 2017 and 2018. Speak to a qualified tax accountant for options to do so.
Income Tax Changes
As you’ve probably heard, Congress just passed legislation to change income tax law. There are many components to the new law, which we won’t go into detail on here. The important thing to know is that the changes will likely alter your income tax liability and figures that are used for certain aspects of your estate plan. Certain aspects of the plan expire in future years as well, so keep this in mind when evaluating estate planning changes for 2018 and beyond.