Breadcrumbs

Under the current Trump administration, the Federal Estate tax exemption is $11.58M for individuals ($23.16M for married couples) with a top tax rate for estate tax of 40%. This amount will continue to increase with inflationary adjustments temporarily until it is slated to sunset starting January 1, 2026which reverts to pre-2018 levels of around $5M (adjusted for inflation) 

Biden’s tax proposal suggests restoring the estate tax exemption back down to 2009 levels at $3.5M for individuals ($7.0M for married couples) and increasing the top estate tax rate to 45%.  These changes could take effect as early as the January 1, 2021, but more than likely the following calendar year in 2022. 

PLANNING IMPACT: 

The IRS issued final regulations making it definitively clear there is no claw back on gifts made during life if the federal exemption is lower at time of death.  Considering Biden’s proposed planit is important to consider various estate planning strategies now using the remaining lifetime exemption in 2020 (use it before you lose it) versus a wait and see approach.  Prior to gifting any amounts, you should first consider your future cash flow needs and be sure to keep enough liquid assets required to live your lifestyle past your life expectancy. 

INVESTMENT IMPACT:  

Investment portfolios outside of your taxable estate (Legacy) will look to have a longer time horizon, pushing asset growth to the future generation(s).  The risk profile of your lifestyle portfolio and legacy portfolios will have to be considered. 

 

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Disclaimer

Joseph Maker, CPA, CFP®

Director - Wealth Planning & Wealth Planning Analyst

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