The IRS published the new estate and gift tax exclusions & exemptions for 2019.

Regardless that the top tax bracket remains 40% for the free transfer of assets and investments during the calendar year, whether during life or after death, the personal lifetime exemption has increased to $11,400,000.

This means that a couple of U.S. citizens, legitimately married, can enjoy an exemption of $22,800,000 when they transfer their assets during life, or after their deaths. Now, in case one of the spouses is not a U.S. citizen, and who survives the citizen spouse, AND the amount to inherit exceeds the $11,400,000 exemption, then a Qualified Domestic Trust or QDOT shall be needed, unless the surviving non-citizen spouse becomes a citizen within 9 months of the death of the citizen spouse.   

Resident-aliens, whether legally or not, or those who are benefited by an Estate Tax Treaty, are entitled to the same exemption of $11,400,000, which shall continue to be indexed annually against inflation. While the nonresident-noncitizens can take advantage of the top tax bracket of 40% for estate, gift, and generation-skipping transfer taxes, they can only take a tax credit of $13,000, which means an actual exemption for only $60,000 worth of assets or investments.

Also, the new annual exclusion for 2019 for gifts during a calendar year is $15,000 per beneficiary. For gift transfers during their lifetimes between noncitizen spouses, or where the receiving spouse is a noncitizen, the “Super Annual Exclusion” is topped at $155,000 for any calendar year.

The limits on the exclusions and exemptions for noncitizens or nonresidents, show the ever pressing need to plan carefully to reduce or eliminate these taxes.

Lastly, please remember that these exclusions and exemptions are only temporary and valid through the year 2025, which is the date that Trump’s tax reductions expire, unless there is another republican administration that extends them. For now, starting on 2016, the exclusions and exemptions shall return to their previous limit of $5,000,000 per person and annually index against the inflation.

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