Estate Tax Changes are Coming

Estate Tax Changes are Coming

The election has been decided. The Democrats now control the White House as well as the House of Representatives. While the Senate is split 50/50, the Vice President can cast a tie-breaking vote in favor of Democratic legislation. President Biden and the Democrats have campaigned on increases in the estate tax. Also, there’s a reconciliation process that allows for budget and tax increases to be made with only 51 votes in the Senate. For this reason, it’s very expected that estate tax changes will be coming.

With these looming changes, there are key issues you and your clients should consider:

1. Implement estate tax planning as soon as possible. With these changes in Washington, it’s expected that the estate tax exemption will be reduced to either $5 MM or $3.5 MM per person (down from $11.7 MM per person). Under current law, if you don’t use the higher exemption before it changes, it’ll be lost. In other words, this higher exemption won’t be available to you and your family could face a 40% estate tax at your passing. For this reason, if you’re married and have more than $10 MM in assets or single and have more than $5 MM in assets, you should implement estate tax planning as soon as possible.

2. Have your estate plan reviewed. If you have between $6 MM – $10 MM in assets and haven’t had your estate plan recently reviewed, it’s highly recommended you do that. It’s especially important if you or your spouse is not in good health and may pass away in the near future. Your estate planning attorney will advise you on whether your current plan will still protect you and your family.

3. Be aware of possible retroactivity. We don’t know when these estate tax changes will be coming and most importantly if they’ll be retroactive to an earlier date. There’s even a chance they’ll be made retroactive to January of 2021. There are planning techniques to undo transfers and avoid unintended gift or estate taxes. These should be incorporated into any estate tax planning you or your clients do this year.

If you have any questions about the likely changes to the estate tax, feel free to contact me


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