Ethan R. Okura and Carroll Dortch
Hawai‘i Herald Columnists
On Nov. 2, the proposed Tax Cuts and Jobs Act of 2017 was released to the public. The Republican-sponsored bill introduced by the U.S. House of Representatives is intended to simplify America’s tax code. It offers many changes, which we will review in this column.
The change most relevant to estate planning is the proposal to eventually eliminate the estate tax, which was done for one year in 2010. There is currently a $5.49 million exemption from estate tax at death (or the exemption may be used for gifts made during life). This means that a married couple that has planned properly can pass away with $10.98 million going to their heirs free of estate tax. The federal government taxes assets above the exemption amount at 40 percent at the time of death. (The same applies to amounts given away during life that are in excess of the exemption amount.) The Tax Cuts and Jobs Act immediately doubles the exemption amount to $10.98 million per person and eliminates the estate tax completely by the year 2024 — unless Congress reverses this change after the next election cycle.
When the estate tax was first introduced in 1917, it was a tax only for the super ultra-wealthy. It was a 10 percent tax on assets exceeding $5 million. Adjusted for inflation using the Consumer Price Index, that’s equivalent to only taxing 10 percent on the excess assets in estates worth more than $104 million in 2017 dollars.
© OKURA & ASSOCIATES, 2017
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Ethan R. Okura received his doctor of jurisprudence degree from Columbia University. Carroll (Cary) D. Dortch received his doctor of jurisprudence degree from the University of New Hampshire School of Law.
The lawyers at Okura & Associates focus their practice on estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.