In January 2018, several new tax laws went into effect that could change your future planning. You should check in with the lawyer who prepared your estate plan and any documents for your child with special needs to see if it is time for an update. If you have not yet done any future planning, now is the time to start.
- Estate and Gift Tax
One of the biggest changes to the tax laws is the increase in the estate and gift tax lifetime exemption amount. For individuals, the exemption doubles from about $5.6 million to $11.18 million. For spouses, the exemption also doubles to $22.36 million. Note that in 2019 these exemptions will now be $11.4M and $22.8M respectively
The change is a boon for families who plan to make substantial lifetime gifts to special needs trusts. When you make a contribution to some types of special needs trusts, the money you put in counts as a gift. Gifts to special needs trusts do not qualify for the yearly $15,000 gift exclusion amount. Instead, these gifts count against the lifetime exemption. An increase in the exemption amount means an increase in the likelihood that your estate will not owe gift taxes later on.
Again, you should check with your lawyer if you plan to make substantial gifts during your lifetime or anticipate having a large estate upon your death.
- No More Personal Exemption
The new tax laws eliminate the personal exemption, instead increasing the standard deduction. You may recall that special needs trusts can get tax benefits if they meet requirements to be Qualified Disability Trusts (QDTs). QDTs used to be able to take a tax deduction equal to the personal exemption for that year ($4,150 in 2018).
With no more personal exemption, Congress enacted a special law that still allows QDTs to get tax benefits. The new law simply allows QDTs to take a $4,150 deduction if the personal exemption is $0. The deduction amount will increase slightly every year.
Other changes to the tax laws may affect your current finances or estate. Reach out to a lawyer who has experience with future planning for people with special needs and their families for help.
Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at firstname.lastname@example.org or call 866-TO-RUBIN.