The current federal estate and gift tax exemption amount per individual is $11.7 million dollars ($23.4 million for a married couple). This means that individuals can gift or bequeath this amount without incurring gift or estate tax on the transfer.
But nothing lasts forever. In 2018, the Tax Cuts and Jobs Act increased the exemption amount from $5 million to $10 million, indexed for inflation. If no affirmative action is taken to change the law, then it is due to ‘sunset’ on January 1, 2026, wherein the exemption amount will be reduced to $5 million.
Note, however, since the Presidency, House and Senate are currently under Democrat control, there is a high probability that the sunset provision will be accelerated (possibly as soon as this year), and the exemption amount be reduced to $3.5 million per person. Adding to the uncertainty is the fact that it is possible that any gift and estate tax law change could be retroactive to January 1, 2021. Regardless, if you believe it to be beneficial to take advantage of the historically high exemption to avoid federal gift and/or estate tax, then you should take action now.
A myriad of estate planning techniques exist so that you can both utilize the current exemption amount by gift, and also to create at the very least indirect access to the gifted assets. Implementation of the proper planning techniques now could avoid substantial estate tax in the future.
Planning and acting now creates the best opportunity to use the current exemption amount to avoid future significant estate tax on your wealth, and the attorneys at Underberg & Kessler LLP can guide and assist you with all of your planning needs.
If you have any questions regarding the issues discussed above or if you have any other Estates & Trust Law concerns, please contact the Underberg & Kessler attorney who regularly handles your legal matters or Joshua Beisker, the author of this piece, here or at (585) 258-2879.