November Could Bring About Dramatic Changes to Estate Taxes Retroactive to January 2021

If you have assets that total $3,500,000 or more, you should seriously explore whether you need to do some estate tax planning before the end of the year.  Failure to do so could result in a large tax due on your estate when you die! Why act now? Current exclusions for both estate and gift taxes are set at a generous $11,580,000 for 2020. But that is set to decrease dramatically in 2026—down to only $5,000,000. Some of our current and potential lawmakers are calling to lower it even more drastically to $3,500.000 (for estate taxes) and $1,000,000 (for gift taxes). If there is a political turnover in Washington following the November election, the decrease may be enacted even earlier. And, should legislation be passed in 2021, it could potentially be made retroactive to the 1st of that year.

What this means for you is that you currently have a unique opportunity to transfer up to $11,580,000 ($23,160,000 for a married couple) of assets to a trust that will not be subject to gift tax while you are alive or estate taxes when you die.  By contrast, next year that number could drop as low as $1,000,000 ($2,000,000) for a married couple.  This could result in a savings of over $4,000,000 ($8,000,000 for a married couple) in estate taxes!

For this reason, strategic gifting plans during the remainder of 2020 are the best way to benefit from current exemption rates and still keep as many of your assets in your control as possible.  These plans may include placing assets in an irrevocable trust for your spouse or children, such as a Spousal Lifetime Access Trust (SLAT) (sometimes called a Spouse and Family (SAFE) Trust), or using grantor retained annuity trusts (GRATs).

With trusts of this type, assets are held outside of the individual’s estate so they are exempt from estate taxes, but still controlled by that individual or his/her spouse following the parameters set up in the trust. Under current law, as long as the funds are transferred to such a trust before legislation changes the exclusion amounts, there should be no estate taxes due upon death of the individual.

This article is not meant to be financial or legal advice. The very best thing to do right now, before the end of the year, is to consult with financial and legal professionals.  You can gain peace of mind knowing that you are handling your finances in the most advantageous way possible. The estate planning attorneys at Davis Miles McGuire Gardner are here to help.  With a broad range of experience helping individuals and business owners with estates from modest to vast and complex, our attorneys can lead you each step of the way. Choose DMMG for personal, tailored-to-your-needs legal help.  But don’t wait long!  Many individuals are taking advantage of this unique opportunity and it may be difficult to get it done before year end it you wait too long!

Contacts:  Mike Ferrin     Alan Soelberg