It’s Never Too Early to Plan for Taxes

Margaret A.M. Heine

is the principal counsel at Heine Law Group in Fullerton, California. She is licensed in California and Washington and has authority to practice before the Supreme Court of the United States and the United States Court of International Trade.

Her practice includes estate planning, wills, trusts, and probate as well as business, real estate, and civil litigation. Email: or visit company website


There are some significant changes for 2019 with regard to taxes. Changes as a result of the 2017 Tax Cuts and Jobs Act will kick into place this year, and there will be some significant impact on estate planning.

There is a significant change in the estate tax deduction amounts for 2019. Two aspects of the law have changed on a federal level.  First, the annual gift amount that can be given to any individual by any one person is fifteen thousand dollars ($15,000).  That means that a couple can give up to thirty thousand dollars ($30,000) to any one person without the necessity of filing a gift tax return or having it claimed on anyone’s taxes.  That is the typical question, “If I give this money to my children do they have to claim it on their taxes?”  Simple answer,  “No.” This is a simple and effective manner in which to spread the wealth to other individuals, if you have the cash reserves to do so.

A second change is an increase in the lifetime exclusion amount up from $5.59 million in 2017 to $11.4 million in 2019.  As taxation for estates begins at a 40% tax rate, that is a significant change in tax liability for high worth individuals.  In essence, a couple will be able to exclude up to $22.8 million in assets from federal estate tax.  That would mean that most high worth properties, income properties, second homes, would be able to be excluded from the assessment of estate taxes.  There is still an unlimited exemption for property passing to a spouse, but that spouse would be limited to passing $11.4 million on without taxation.  This increase is only temporary at this time and is scheduled to return to the $5.59 million threshold in 2025 unless extended.

In your estate planning considerations, California presently follows the federal law with regard to the application of estate taxes; however, with proposed changes in health care benefits and other state provided benefits, it has been discussed that California would start to implement an estate tax which would have different thresholds than the federal limits.

Another change which could impact your estate planning decisions is the use of 529 college plans for children or grandchildren.  Under the changes in the tax law, you can now use up to ten thousand dollars ($10,000) in the 529 plan to pay for tuition and expenses for school for children in K through 12.  The limitation is for each account, so, if you have separate accounts for each child that is up to ten thousand dollars ($10,000) per child. That would allow the 529 to grow tax free, and still be utilized for the children’s education before they reach college. This would be a great discussion to have with your financial planner if you consider using the funds before the child goes to college.  This also provides a method for grandparents to set aside funds for their grandchild that would permit usage for their primary education as well as secondary education.

The tax change with regard to alimony payments does not affect estate planning per se, but does have a significant effect on the payor and recipient. If you are divorced after January 1, 2019, the payment of alimony is no longer a tax deduction nor taxable income to the recipient.  Now, the law provides that if you were divorced prior to January 1, 2019, then the old law applies to the deductibility and income reporting of the alimony.  For payors this is a loss of a usually significant deduction.

Another change which does not affect your estate plan per se, but can be important in planning your asset allocations, is that mortgage interest deduction is only available on home loans not exceeding $750,000.00.  So, even if you pay more, the amount of interest you can deduct is capped.  This is another good reason to talk to your financial advisor to make appropriate planning for 2019 if you are considering purchasing new property.

We have seen more mature clients selling their homes and moving into other living arrangements.  Here is something to keep in mind, if you sell your home, you can exempt $250,000 in capital gains from the sale if you are single.  If you are married, then you can exempt $500,000 in capital gains.  If you had a rental property and want to make it a personal residence for tax purposes, then you must reside in that rental property for two of the last five years.  You can only claim the capital gains exclusion once every two years.

If you have investment property, before selling, check with your financial advisor regarding capital gains and depreciation recapture so that you have a full picture of what the net proceeds of the sale would be.

With the changes in the standard deductions, many people will not be itemizing on their taxes any more.  It is a good idea to consult with a financial planner if you are anticipating making large changes in your income or asset ownership before you sell off or purchase so that you can fully evaluate the tax consequences of your proposed plans.

You can, in some instances, plan your capital gains and how to minimize them if you start early enough in the year.  Again, a financial advisor can help you with any questions that you may have.

As a simple disclaimer, we are not financial advisors, and the information provided herein is for informational purposes only and not financial advice.  Have a prosperous 2019!

No Comments

Sorry, the comment form is closed at this time.