The Weekly Scenario: Current Estate and Gift Tax Exemptions
Question: What are the current estate and gift tax exemptions and do they ‘expire’?
Answer: The Tax Cuts and Jobs Act increased the estate and gift tax exemption to $10 million per person, adjusted for inflation. Under this regime, the exemption available to each American taxpayer in 2019 is $11.4 million. The increased exemption amounts are scheduled to cease at the end of the year 2025
As the presidential campaign gets rolling, high profile candidates are providing clues regarding their own plans. For example, Bernie Sanders and Elizabeth Warren have each unveiled tax plans that focus on taxing very wealthy Americans.
Bernie Sanders’ proposal would reduce the estate tax exemption to $3.5 million and the gift tax exemption to $1 million, which are the same amounts that were available in 2009. Sanders’ plan would also apply a top estate tax rate of 77% for estates valued in excess of $1 billion. An estate valued at between $3.5 and $10 million would be taxed at 45% rather than the current 40%.
Elizabeth Warren would impose an annual “wealth tax” on families with assets exceeding $50 million in value. This proposal does not directly affect the estate tax per se, it is an approach that is similar to Sanders’ proposal in terms of a tax on the very wealthy.
Comment: For advisors who work with high net worth clients, it may be a good idea to consider planning opportunities afforded by these high tax exemptions.
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
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Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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