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Discover the Urgency of Estate and Gift Planning Before 2021

Urgency of Estate and Gift Planning Before 2021


The current federal estate and gift tax laws are the most favorable they have been in years. However, depending on the outcome of the November elections, this may change as soon as January 1, 2021. Based on your personal objectives and income needs, you may want to consider available planning opportunities before year-end.

Some of the potential changes include:

  • A decrease in the amount that is exempt from estate and gift tax from the current amount of $11,580,000 ($23,160,000 for a married couple) to $3,500,000 ($7,000,000 for a married couple).
  • An increase in the estate and gift tax rate from 40% to 55%.
  • A decrease in the amount of the annual gift tax exclusion from $15,000 ($30,000 for a married couple) to any individual to a total of $60,000 ($120,000 for a married couple) to all gift recipients.
  • Currently when an individual dies, the income tax basis in his/her assets is stepped up (or stepped down) to the fair market value on the date of death. This allows beneficiaries to sell assets received from the decedent with little or no taxable capital gain. Proposals would eliminate the step up in basis at death and replace it with either the beneficiaries taking the decedent’s income tax basis in the assets or taxing the unrealized gains at death.
  • For individuals with taxable income above certain levels (for example $400,000) the tax rate on long-term capital gains may be increased from 15% or 20% to 39.6%.
  • The loss of discounts for lack of marketability and minority interest in valuing gifts of interests in closely held businesses (Corporations, LLCs and Partnerships). These discounts on average can be between 10% and 30%.

To take advantage of the current low interest rate environment and the favorable federal estate and gift tax laws, opportunities to consider include, but are not limited to, Spousal Limited Access Trusts (SLATs - where assets are excluded from your estate but your spouse has access to the assets during his or her lifetime), inter-family loans, Generation Skipping or Dynasty Trusts, Installment Sales to Defective Trusts, and outright gifts.

However, time is of the essence as the year-end is rapidly approaching. Attorneys will need time to draft any needed documents. Appraisers may need to be hired to value assets. Approval may be needed from co-owners to transfer business interests to trusts or individuals. If you wait until the last minute, professionals may not have the capacity to get everything done and implemented before year-end. Now may also be a good time to review your existing estate plan documents to make sure they are still meeting your objectives in light of the potential changes.


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