Estate & Gift Taxes: What Changed (and What Didn’t) in Trump’s Big Beautiful Bill

0:31 Well, good afternoon, Michigananers, and welcome back to Tuesday with Tom, Michigan's Only podcast, where we talk about estate planning, a state settlement, and everything in between. As always, I'm your host, Tom Doyle, a state planning attorney, lifelong Michigan resident, and your guide to planning for the future. Well, brief review of last episode. Been a little while ago, been trying to enjoy some time off, But the last episode was why older Americans may be better off staying unmarried. So if you're considering possibly getting married later in life, maybe a second marriage later in life, I encourage you. I'm not trying to discourage you from getting married, but I would encourage you. Please listen to last week's episode where I discuss why, under some circumstances, older Americans may be better off as far as the law is concerned, staying unmarried.

1:39 Today's show, well, today we're going to be diving into the big Beautiful Bill. Yeah, that's what they're calling it, and that's what was recently signed by President Trump. What does this mean for your state and gift tax planning? Well, let's break it down into what's changed and what's stayed the same. But Please remember what I'm about to discuss is meant to be educational and informative. It is not legal advice. As always, you need to work with your attorney to figure out what makes the most sense for you and your estate plan a state and gift taxes.

2:35 What changed and what didn't in Trump's big beautiful bill. Well, let's talk about the unified credit amount. The unified credit amount is the amount that you can own at the time of your death, essentially and not have to worry about paying federal estate taxes. Well, under this new law, the federal estate gift and generation skipping transfer to exemption has been increased again. Building on the twenty seventeen Tax Cuts in Jobs Act, which temporarily doubled the exemption, this bill now permanently locks in that higher exemption and going forward will be indexed for inflation. So the new exemption amount in twenty twenty five is twenty six million per couple.

3:28 That's thirteen million dollars per individual, and it will be indexed annually, so you don't have to worry that next January it's going to be dropping back to that seven million, which was all the concern that we had. Now that this statute has been signed. This law has been signed by President Trump. It's locked in at that thirteen million dollars per individual twenty six million dollars per couple. Again, this is now permanent, removing that sunset that was set to occur at the end of twenty twenty five. Portability has been made simpler. Portability what is that. That's where a spouse who dies and hasn't used up all their exemption, that unused exemption can be passed on to their surviving spouse. Well, portability of unused exemptions between spouses. It's been retained, but it has been simplified. Now a surviving spouse has ten years rather than five to elect portabilities. So if your spouse has died, you now have ten years from the time of their death to make an election to portability, which would give you the unused portion of your spouse's federal estate tax exemption instead of the previous five years.

4:56 There's also a safe harbor rule that will allow late filings in certain hardship cases without the need to get a private IRS letter ruling. So portability is still there. Portability simplified, and you have a longer period of time in which to make that election. Three. Valuation discounts are preserved, but they have a twist. So what's a valuation discount. Well, evaluation discount is a strategy where you come in and say, look, I've got a private I've got a family business, but I don't own at least fifty percent of the family business, and so it's not really worth as much in my state plan because I can't force a sale. So the idea is that you claim that it's worthless because of a valuation discount. Well, the bill explicitly protects valuation discounts for family owned businesses, but limits discounts for passive investment entities that don't materially operate. So what do I mean? Well, discounts for lack of marketability and control will still apply for operating companies, but no discounting shell LLCs or family limited partners ships that just hold stocks or bonds. So it's only going to apply to actively operating companies. Four

6:35 new compliance tools. Well, now the IRS has new authority to automatically cross reference gift reporting with annual ten ninety nine's and other asset transfers. Why because they want to know if gifts have been made that haven't been reported. So this is expected to quite frank the increase enforcement around under reported lifetime gifts. If we look at the idea, when you make gifts that exceed the annual exemption amount that we're going to talk about, and you don't want to pay the gift tax on that, you can defer the gift tax until you die. But there needs to be a mechanism for reporting those gifts. And this is simply going to give the IRS new authority to be able to cross reference different documentation to try and identify gifts that have been made and have not been reported that would impact one's lifetime exemption and or require payment of a gift tax. Well, okay, so fourth eight summary.

7:52 What's changed. Unified credit amount has been doubled to that currently thirteen million twenty six per couple. Two, portability has been made simpler. Three valuation discounts have been preserved, but with a twist, and for there are new compliance tools that the IRS has to be looking at unreported gifts. So what hasn't changed, Well, what hasn't changed is the top tax rate stays at forty percent. So despite debate and argument in the House and the Senate. The top of state and gift tax remains at forty percent, So if you are in the top federal estate and gift tax area, it's going to be a forty percent tax on the amount that essentially exceeds at federal state tax exemption.

8:46 The annual exclusion is unaffected. What is that. That's a annual exclusion for gifts that you can make that you don't have to report, and that don't impact your federal estate tax exemption. So the annual exclusion for gifts currently eighteen thousand dollars per done in twenty twenty five, is unchanged. You can still give this amount each year to as many people as you want without losing your lifetime exemption. Three Stepped up basis is still intact, and this is an important one because there's a lot of discussion about getting rid of it, but it doesn't touch stepped up basis at death and what does that mean? Under stepped up basis, when you die, your heirs the basis and assets that have appreciated gets reset or stepped up to the fair market value, which minimizes capital gains taxes when they later sell it. That's an important one for a lot of clients, even if they didn't have a federalistate tax issue, they have assets that have significantly appreciated and because of step up basis, when the airs receive those assets, their basis in the asset gets stepped up to the fair market value, so that when they sell it, they

10:17 are minimizing or avoiding potentially totally capital gains taxes that would otherwise be owed if step up basis wasn't there. So that helps people, even those who don't have a federal state tax issue. So again, what hasn't changed. The top rate stays at forty percent, annual exclusion is going to be unaffected, and step up basis is still in tact. So what does this mean for you? Well, if you're in the high net worth bracket, congratulations, your tax planning window just expanded dramatically and permanently. If you're in that high networth brackt and we were talking to you, you're talking to your tax advisory attorney in the first part of this year, you were looking saying, Hey, what's going to happen if the federal state tax exemption amount drops from thirteen million to seven what's going to happen to my What are my options, How do I plan for that because there's things that I need to do by year end. You don't have to worry about that now because it's not going to drop. That doesn't mean you don't have tax planning that needs to be considered, but your tax planning window. For some of you, it might mean that you don't have a federal state tax tax that you have to worry about. For others of you, it simply means there's a lot more than what's going to be available by years and for you to pass on to your loved ones without worrying about a federal

11:50 state tax. Now, if you've used things like grats and family limited partnerships or slats, different planning structures that people were starting to use in a way to try and minimize or avoid federalistate taxes, these structures still remain valid, but new compliance mechanism means that they must be tightly documented and reported. So if you've used a grant, grant, our returned annuity trust, or a family limited partnership or a SLAT as part of your federalistate tax planning, you're going to want to check with your advisor to make sure that you are complying with new compliance mechanisms so that you're not going to have any problem with those tools that you have already implemented. If you're a business owner, well, the business owner, think about this. The law favors active family businesses. That is that discount that I talked about for valuation purposes, So it favors active family businesses. So discounts and exemptions are preserved. But always make sure that your entity, whatever it is, doesn't fall into what is the passive investment trap. Well that's basically the Samia. Not a lot has really changed, Okay, which is good. It's

13:23 kind of saved what we already had. Make a couple tweaks here and there, particular when it comes to portability, which is going to be important for any number of people and the whole make sure it preserves the family discount or the valuation discounts for family businesses. Farmers are going to be happy with that. Business owners are going to be happy that those were in fact preserved. So the new estate and gift tax rules under the Big Beautiful Bill, the bottom line is this, the bill brings more certainty, higher exceptions, exemptions, I'm sorry, and tighter compliance.

14:33 Now if after listening, you're sitting there wondering how the big beautiful bill unpacks your state plan, or whether you should be making large gifts us here, please give us a call, or, better yet, visit DOYLELPC dot com where you can book in appointment with us. Amanda and I would be honored to meet with you to discuss the impact that the federal state tax changes or what stayed the same effect your estate. We'd also obviously love to help you protect the people you love, whether that means creating a brand new estate plan, updating and existing one, or guiding you through the estate settlement process in a difficult time. We try and make it easy and convenient to get started. We have person appointments those are available in Grand Rapids and Lancing. We have virtual consultations that can be by zoom or phone, so we can help you wherever you are in the great state of Michigan.

15:33 And then, don't forget we have our legal Store, the legal stores. You just need one document, maybe all you need is a new power of attorney for healthcare. Take a look at the Legal Store browsing, where you can order individual legal documents anytime twenty four to seven through our legal store. All of that is available at Doyle Law PC dot com. Simply visit doilpc dot com. You're gonna find information on how to do all of those things so that you can get together with us. Of course, if you do that, we obviously look forward to the opportunity to work with you. Well, that's going to be a wrap for today's show as always. Ooh. If you have a comment, a question you'd like to have answer, or a topic you'd like me to cover in a future episode, head over to Tuesday with Tom dot com.

16:51 There you can leave me a voice message by clicking on the microphone or just send me an email at Tom. At Tuesday with Tom, please be sure to follow us on Facebook invite your family and friends to do the same. That would be Tuesday with Tom and the office is available. Our Facebook page is Doyle Law PC. Don't forget to subscribe to our email list at Tuesday with Tom dot com so that you can stay up to date with new episodes and important estate planning tips. And remember, you can listen to Tuesday with Tom wherever you enjoy your podcasts or on Apple Podcasts, Spotify, Amazon Music, Google podcast, iHeartRadio, speaker and many many others, and don't forget you can always ask your smart speaker to play Tuesday with Tom. Well, thank you again for spending some of your Tuesday with us today and until next time, take care, stay safe, and have an awesome day and an awesome week here in Michigan. Tuesday with Tom has been brought to you by the estate planning attorneys at Doyle Law PC. To learn how we can help you with your estate plan or with settling a loved one's estate, please call us

18:21 today at five one seven three two three seven three sixty six. That's five one seven three two three seven three sixty six.