If you’re inheriting money, you’re in luck in the Make America Great Again era.
President Donald Trump’s tax overhaul doubles the amount that can be passed to heirs without worrying about estate and gift taxes, topping out at about $22 million for a married couple, Bloomberg reports.
However, the current thresholds are in place until 2025, meaning many who’d benefit from it aren’t born yet, and the ultra rich are turning to dynasty trusts to ensure the financial futures of their heirs.
“For the mega-wealthy, it’s really a window of opportunity that’s limited,” says Joan Antoniello, a principal at Mazars USA Wealth Advisors.
Dynasty trusts can only be set up in a few states, but they let the richest Americans preserve wealth for generations because they don’t have expiration dates and can be funded tax-free with assets up to the exemption limit, which was $10.98 million in 2017 for couples, but will go up under the new laws.
They’re structured so the trust pays each generation of heirs only some of its proceeds, while the rest of the money grows—free of estate and gift taxes. Some families are already working to transfer money out of their estates into the trusts in case the limits are pulled back down before 2025.
Even though fewer than 2,000 families each year would be subject to the new estate tax limits, billions of dollars are at stake because the richest 0.1% of families control a growing share of U.S. wealth—22% in 2012, up from 7% in 1978—according to a University of California, Berkeley study.
