As we move into 2019, business owners face many challenges and uncertainty with respect to the tax and legal landscape involved in estate planning and succession planning due in large part to the continuing impact of the Tax Cuts and Jobs Act of 2017 and the impact of rising interest rates on planning techniques commonly utilized by business owners to successfully transition ownership of a business in a tax efficient manner.

The Tax Cuts and Jobs Act of 2017 (the TCJA) was signed into law on Dec. 20, 2017, with an effective date of Jan. 1, 2018. By now, most individuals who have potential exposure to the federal estate tax, and advisers who represent such clients, are well aware that the TCJA amended the federal estate, gift and generation-skipping transfer tax laws in a number of significant ways, including, most notably, the temporary doubling of the basic exclusion amount from $5.49 million ($5 million with a $490,000 inflation adjustment) for gifts made, and for decedents dying, in 2017, to $11.4 million  ($10 million with a $1.4 million  inflation adjustment) in 2019. As a result, this year spouses are effectively able to shelter a combined $22.8 million from federal transfer taxes with appropriate planning. The basic exclusion amount will continue to increase annually based on inflation indexing through 2025, at which point the exclusion amount will sunset to pre-TJCA levels. Current estimates are that the basic exclusion amount in 2026 will be somewhere in the range of $6.2 million to $6.4 million per person.

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