On November 6, 2019, the IRS announced the final estate and gift tax exemption amounts for 2020, as adjusted for inflation.  The estate and gift tax exemption for 2020 will be $11.58 million per person, whereas the annual gift tax exclusion amount is unchanged at $15,000.  The adjusted estate tax exemption amount means that an individual will be able to shelter up to $11.58 million in assets from estate tax upon his or her death in 2020, and a married couple will be able to shelter up to $23.16 million in assets (assuming that portability is utilized).

Keep in mind, however, that the Tax Cuts and Jobs Act will sunset on December 31, 2025 without further legislation, at which point the increased exemption amounts will return to those in effect in 2017 ($5 million, as adjusted for inflation).  In addition, new legislation reducing the estate, gift tax, and GST exemption amounts could be in the works depending on the results of the 2020 election.  For examples of some previously introduced bills to this effect, see our two recent blog posts, Dueling Estate, Gift, and Generation Skipping Transfer Tax Senate Bills and Yet Another Estate, Gift, and Generation Skipping Transfer Tax Senate Bill.  The moral of this story, therefore, is that the historically high exemption amounts now in effect may not be here to stay.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

In an earlier post, “Dueling Estate, Gift, and Generation Skipping Transfer Tax Senate Bills,” we discussed two different Senate bills concerning the federal estate, gift, and generation skipping transfer (GST) tax rates and exemption amounts.  On June 25, 2019, Senator Chris Van Hollen (D-Md) introduced yet another bill, the “Strengthen Social Security by Taxing Dynastic Wealth Act.”  This bill would simultaneously reduce the federal estate, gift, and GST lifetime exemption amounts while increasing the applicable federal estate, gift, and GST tax rates.

The bill would reduce the lifetime exemption amounts to a basic estate tax and GST tax exemption of $3.5 million (the exemption amount in effect in 2009) and a gift tax exemption amount of $1 million.  Notably, this would appear to “de-unify” the gift tax exemption from the estate and GST tax exemption amounts.  In addition, the bill would increase the maximum estate tax rate from 40% to 45%.  Finally, the bill would divert estate tax revenue to the Social Security Trust Fund in an attempt to bolster the program’s depleted reserves.  The projected revenue generated by the bill would cover approximately one-fifth (1/5) of Social Security’s estimated long-term funding gap.

Like the previous two bills, this one is unlikely to become law.  However, the number of bills introduced in the last year should remind us that the applicable exemption and exclusion amounts are always subject to change, and that it’s important to periodically review your estate plan with the current exemption amount in mind.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Earlier this year, two very different bills relating to the federal estate, gift, and generation skipping transfer (GST) taxes were introduced in the United States Senate.

On January 17, 2019, Senator Tom Cotton (R-Ark.) introduced a bill that would reduce the federal estate, gift, and GST tax rates to a flat rate of 20%.  Under current law, these transfers are subject to a progressive tax rate that maxes out at 40% for transfers in excess of $1 million (subject to the federal lifetime exemption amount of $10 million, as adjusted for inflation).

Conversely, the “For the 99.8 Percent Act,” introduced by Senator Bernie Sanders (I-Vt.) on January 31, 2019, would reduce the federal estate, gift, and GST lifetime exemption amount to $3.5 million. The federal lifetime exemption amount is currently set at $10 million (adjusted for inflation to $11.4 million for 2019), and will decrease to $5 million when certain provisions of the Tax Cuts and Jobs Act of 2017 sunset on December 31, 2025.  In addition, the Act would raise the federal estate, gift, and GST tax rates to 45% for transfers of $3.5 million to $10 million, 50% for transfers of $10 million to $50 million, 55% on transfers of $50 million to $1 billion, and 77% on transfers in excess of $1 billion.

Although neither of these bills is likely to make it through both houses of Congress to become law, it is always worth keeping an eye on legislation that has the potential to impact your estate plan.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.