The newly passed tax reform bill includes some significant changes to the estate tax. Here’s what you can expect.
While the Tax Cuts and Jobs Act made sweeping changes to the estate tax limits, in reality, unless you have significant wealth, you won’t be directly impacted. However, the changes are bound to stir strong emotions in those that feel the reforms are a gift to the wealthy. So what’s new?
Let’s be honest, for a few years now the chances of actually having to deal with estate tax liability have been pretty low, as most Americans don’t have estates valued at anything close to the limits at which liability is imposed. In 2017, for example, every person could shield nearly $5.5 million from estate tax. Frankly, if you were lucky enough to have an estate worth that much, you would have almost certainly done some effective estate planning to limit any liability you could potentially have.
Well, as if that $5.5 million threshold wasn’t high enough, beginning in 2018, individuals can shield a whopping $11 million (give or take a few hundred thousand dollars, since that’s indexed for inflation) from estate tax liability, and that’s only if you’re not married (more on that later). While that amount is set to sunset in 2025 and revert to the measly $5 million amount in place for 2017, the fact remains that the changes won’t have a direct effect of most people.
Increased Annual Exclusion
Each year, every person is able to make as many gifts of up to $14,000 to as many people as they want without being subject to gift tax. That’s called the annual exclusion. The amount is indexed for inflation, so it does rise a bit each year. For example, in 2018, that amount increases to $15,000. The new tax law does not change the annual exclusion.
No Changes to Portability
Portability refers to the concept that married couples can use any unused portion of their spouse’s estate tax exemption. So, for example if a husband dies first and only passes assets worth $3 million upon his death, then the remaining untouched $2 million can be preserved by his wife. So, upon her death, in 2017 she would have been able to pass assets worth $7 million (her $5 million exclusion plus her husband’s unused $2 million). The concept doesn’t change in the new tax law, but the amounts obviously increase. So, beginning in 2018 married couples can pass a whopping $22 million free of estate tax!
Beware of the Sunset
As they say, “all good things must come to an end.” Or, if you have disdain for the new changes, maybe not so good. But, the fact remains that, if Congress does nothing to extend the provisions of the new law, they will revert back to pre-change, 2017 rates in 2025.
What About State Estate Taxes?
As readers know, on this blog, we focus on the effects of laws on midwestern residents, namely those in Illinois, Wisconsin and Minnesota. So how will the new estate tax changes impact them? Well, it’s not all roses, specifically for residents of Minnesota and Illinois, who, as well as paying federal estate taxes if their net worth is above certain thresholds also have to pay a chunk to the state. In Minnesota, residents who die in 2018 will be required to pay estate taxes at a top rate of 16% for any amounts over $2.4 million—a far cry from the federal limit. That threshold does increase to $2.7 million in 2019 and $3 million in 2020. In Illinois, things are a bit better, but residents will still pay estate tax at a top rate of 16% on amounts over $4 million.
So What Does the Impact Look Like in the Real World?
As is probably apparent, the reality is that the changes to the estate tax under the new tax law won’t have a significant effect on anyone but the most well off Americans, and even then, it won’t matter unless they die prior to 2025. In fact, it is estimated that only around 1,800 estates will be subject to estate tax in 2018 nationwide. So, the real effect is more so along the lines of anger and frustration that a change was even necessary.
Michael F. Brennan is an attorney at The Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at firstname.lastname@example.org with questions or comments, or check out his website at www.thevirtualattorney.com.
The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.
Wow! So, as I was browsing Google the other night-as I do from time to time to make sure that The Virtual Attorney is being appropriately represented in the ether- I came across this.
That happens to be the very first press release I ever sent out telling the world that we're open for business. While "the firm" existed prior to that, I consider April 16th, 2012 as the date it became official. It marks the date that I moved from wondering lawyer to The Virtual Attorney. It's amazing to look back see how far the firm has come since those first days. Perhaps the most obvious difference is the name itself. Back then, I was going by Michael F. Brennan Law Offices with a simple self-designed logo and no real brand direction as I honed and fine-tuned exactly what I wanted the firm to be and what I wanted it to stand for.
If you're at all familiar with me or The Virtual Attorney, you know that this is an ever-evolving adventure. Whether Michael F. Brennan Law Offices or The Virtual Attorney, I've always made it my primary goal to think of legal services as something that everyone should be able to access. I've continually asked myself how I can do things differently or shake up an industry that is infamously resistant to change while adhering to my responsibilities as a lawyer to provide exceptional service and support to those who most need it.
I'm looking forward to taking a look back in another two years to see where The Virtual Attorney has gone and what it has become, but in the meantime, I'd just like to say thanks to everyone out there that has inspired me to make it what it is today.
Original Press Release for Michael F. Brennan Law Offices, April 16, 2012
"MILWAUKEE, April 16, 2012 /PRNewswire-iReach/ -- Michael F. Brennan Law Offices is proud to announce the launch of a new 100% virtual law office (www.michaelfbrennan.com). Based in Milwaukee, WI, it is the first known virtual law office serving clients in the tri-state area of Illinois, Wisconsin, and Minnesota.
Operated by a licensed attorney, it offers an alternative to online legal document sites by providing state-specific legal advice and direction without the costs associated with a traditional law firm. "People today are very comfortable using technology in their everyday lives whether it's to buy clothes or pay a utility bill. I don't think that the delivery of many legal services needs to be any different," says founder Michael Brennan.
In his words, "If the security and quality of representation can be carried over to a virtual platform, I think the value is evident. Part of the reason that I opened this firm was to help build business. There is no reason that a new salon owner or someone with a great idea for a star-up should have to go without the aid of an attorney. At the same time it was obvious to me that many times cost or access was an issue. Basically, I'm a small business owner that is trying to support small businesses. I have something to offer new businesses that can remove some of the stress of starting out."
Michael F. Brennan Law Offices offers unbundled legal services in the estate planning and business law fields, including services such as the drafting of wills, trusts, articles of incorporation and LLC agreements, contract drafting and negotiation and powers of attorney. In the context of estate planning and business law this means that a client pays for document drafting and review by an attorney knowledgeable in state-specific laws as well as detailed instructions to follow to ensure that the documents are properly executed and filed, if necessary.
"You can buy the services you need and communicate on your own schedule from your home or office while keeping the costs reasonable by doing some of the legwork yourself," Brennan says.
In today's world a virtual law firm is capable of providing quality legal services to a client base that is increasingly comfortable using the internet to purchase goods and services. Michael F. Brennan Law Offices strives to provide exceptional legal services that are convenient and accessible while keeping costs reasonable. In today's world accessibility and convenience are not only important, they're necessities.
For more information on estate planning or business law services visit www.michaelfbrennan.com.
News distributed by PR Newswire iReach: https://ireach.prnewswire.com
SOURCE Michael F. Brennan Law Offices"
> It is now illegal in Wisconsin to post a sexually explicit image of someone on the Internet without their knowledge as the state legislature follows a number of other states in passing a “Revenger Porn” law.
> Lawyers representing five former fraternity members charged following the 2012 death of a pledge are hoping to convince a judge that Illinois' hazing law is unconstitutional.
> A new Wisconsin law is about to make it tougher for scammers trying to sell residents overpriced deeds to their properties.
> CNN takes an interesting look at current developments in civil rights jurisprudence and what some see as an erosion of Civil Rights era Supreme Court decisions.
> Minnesota’s governor is about to sign legislation that will increase minimum raise wages for workers throughout the state as they get a series of raises beginning this summer. For large employers, the mandatory pay will climb to $8 in August, $9 a year later and $9.50 in 2016. Smaller employers will also have to pay more, although the wage for them reaches only $7.75 per hour by 2016.
By Michael Brennan
By now, you may have heard about Heartbleed- an OpenSSL bug which allows an internet attacker to read the memory of a server or a client, allowing them to retrieve, for example, a server's SSL private keys. A number of websites have potentially been affected, including MyCase, which we use to host our client portal.
While we haven't had any direct indication that any confidential information has been compromised and don't have and reason to believe that any has been compromised, we still want to make sure that proper steps are taken to ensure that all confidential or sensative client information remains protected. Below is an email received from the support team at MyCase with more information about what they have done to ensure that all of our information is kept safe and secure.
So, if you have an account with The Virtual Attorney, please take a few minutes and follow the suggested steps below. We take client confidentiality very seriously and are confident that MyCase shares that sentiment. If you have any questions please don't hesitate to contact us.
"As with many internet services, MyCase was effected by the recent Heartbleed vulnerability. We take the integrity of MyCase and your data seriously and have invested extensively in our ability to effectively and rapidly respond to unforeseeable events such as Heartbleed.
After the vulnerability was announced we immediately took the following steps:
- Patched the software affected by Heartbleed.
- Re-issued our security certificate and terminated all active user sessions.
- Performed a full security audit to determine whether MyCase was compromised, for which no evidence was found.
To mitigate against further vulnerability, we recommend that you perform the following actions:
- Immediately update your MyCase password. (We also recommend changing your password to all other critical online services you use.)
- Log out of the MyCase app on your smart phone and log back in with your newly created password.
- Log out of the MyCase Outlook plugin and log back in with your newly created password. (As applicable).
If you have any questions about how to perform the above actions, please contact our support team at email@example.com."
► The internet was shocked and rightfully outraged Wednesday afternoon when Massachusetts’ Supreme Court rule that a man taking cellphone photos up the skirts of women did not violate the state’s Peeping Tom laws. So what does Illinois law say on the subject?
► An important new legal development in Illinois is likely to have far reaching effects on construction businesses and the way they use contractors to perform work.
► Sex trafficking is much more common in Wisconsin than it’s perceived to be. While Wisconsinites tend to think human trafficking is a problem confined to developing nations and large urban areas, the statistics show otherwise.
► Governor Scott Walker signed a bill into law on Monday that will help save the lives of children in Wisconsin. The bill is called "Saving Little Hearts" and it's one that will make it mandatory for newborns to get a Pulse Oximetry test in the state of Wisconsin.
► If the vehicle you just bought turns out to be a lemon, you’ll now have less time in Wisconsin to seek damages from the manufacturer and you won’t get as much money.
► A bill was sent through to the Illinois House of Representatives on March 5 to disband the Illinois Charter School Commission.