There's been a big change to the estate and gift tax rules for 2018. We'll focus on the Louisiana components first, and then the federal components.
The Louisiana aspects to gift and estate tax are pretty simple. Louisiana no longer has either a state gift tax, or a state estate tax. While Louisiana, at one point, assessed a state inheritance tax when Louisiana residents died, that Louisiana inheritance tax no longer exists.
From a federal standpoint, the gift tax present interest annual exclusion increased from $14,000 to $15,000 in 2018. It gets adjusted every few years for inflation, but in $1,000 increments. The confusion comes in when people make gifts that in excess of the $15,000 present interest annual exclusion. Some people mistakenly believe that if a gift is made in excess of this amount, that someone owes tax. This belief is wrong. By making a gift in excess of $15,000 to someone in 2018, the person making the gift will simply be using some of their $11.2 million estate tax exemption - which they can use either during their lifetime or at their death. So, there will be no gift tax due (unless the gifted amounts exceed $11.2 million).
People refer to the gift in excess of $15,000 as a "taxable gift." But that is a misnomer. I believe the gift in excess of $15,000 should be referred to as a "Reportable Gift," because in almost every instance, no tax is due by anyone.
The federal exemption for 2018 skyrocketed from the 2017 amount of $5.49 million to $11.2 million. However, for your rich folk, the exemption is scheduled to revert back in 2025 to about $6 million (hard to predict because of the inflation adjustment).
Bottom line: almost no one (except for the uber-wealthy) need to worry about paying either gift or estate tax. The public mistakenly think that taxes are due when a gift exceeds $15,000 (the present interest annual exclusion), but those thoughts are wrong. The gift in excess of $15,000 should be referred to as a "Reportable Gift" instead of a "Taxable Gift," which infers that tax is due as a result of the gift.
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Louisiana Estate Planning Attorney
Phone: (225) 329-2450