Charitable gifts and estate planning after tax reform

Many changes affected federal estate taxes with the passage of the Tax Cuts and Jobs Act at the end of 2017. Some people have wondered if fewer individuals in Texas and across the country may choose to include philanthropy as part of the estate planning process as a result. The fact that charitable gifts made in a will are exempt from inheritance and federal estate taxes has helped to spur significant giving from donors over the years. However, including philanthropic giving as part of one's estate can also provide powerful intangible rewards reflecting social priorities.

Up until the end of 2017, each person had a federal estate tax exemption of $5.49 million before beneficiaries would be burdened with taxes. While this already left most Americans far outside the reach of estate taxation, the exemption has now grown to $11.18 million per person as of 2018. For over 99.8 percent of people across the country, this means that their heirs will pay no federal estate taxes. Approximately 65 percent of people across the country live in states like Texas with no state inheritance tax.

Despite the role of tax benefits in encouraging charitable will bequests, it seems that philanthropy will continue to play a significant role in estate planning. Because children and other heirs will no longer face cuts to their inheritance as a result of federal estate taxes in most cases, the donor may feel more comfortable leaving an unchanged or even greater bequest to a charity.

People who are considering how to handle their will bequests and other estate planning matters may benefit from professional advice regarding the financial and legal consequences of different choices. An estate planning attorney may draw up documents including wills, trusts and powers of attorney as well as help clients create a plan that is designed to protect their assets and benefit their loved ones.

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