Estate and Tax Planning Update: November 24, 2020
On October 1, 2020, we sent out a communication regarding the presidential election. Election Day has now passed, and January 20, 2021 marks Inauguration Day, when a new administration takes office. This new administration comes into office amid speculation about potentially significant changes to the favorable federal estate tax exemption that was increased under the Tax Cut and Jobs Act of 2017. Further complicating this picture, control of the U.S. Senate will likely not be known until the results of Georgia’s runoff elections in January, 2021.
As a reminder, under the 2017 Act, the amount which an individual can gift during his or her lifetime or transfer at his or her death without incurring federal gift or estate tax doubled under the Act. For 2020, each individual has a federal estate tax exemption of $11,580,000 or $23,160,000 for a married couple. This historically large exemption is due to sunset on December 31, 2025, when it will revert to an approximate inflation-adjusted amount of $6,800,000, or $13,600,000 for a married couple. However, the change in administration and the new Congress could accelerate this reduction or otherwise reduce the exemption, and/or make other changes to the law.
The estate and gift tax implications of the election are yet unknown, and any insight into what may actually come to fruition is currently conjecture. Nevertheless, it is prudent that you consider the possibility of a significant reduction in the exemption amount. Each avenue of planning elicits caution, and there is, unfortunately, not a one size fits all approach. Accordingly, we at Timoney Knox urge you to reach out to us with any questions or concerns that you may have, and to promptly schedule a Zoom conference with our knowledgeable tax and estate planning attorneys to discuss the planning goals and objectives unique to your specific situation – there is no standard technique or suggestion.
Please keep in mind that proper planning now could have a profound impact on the conservation and disposition of your assets for generations. If you have an estate which is currently subject to federal estate tax or which might be subject to federal estate tax upon the sunsetting of the 2017 Act, or earlier reduction of the lifetime exemption, now may be the time to be proactive.