Estate planning for 2021 should be a priority this year. Why? Because the new Biden Administration has a number of tax policy proposals that may significantly change how you will approach your estate planning moving forward.
As you likely know, in 2017, under the previous administration, Congress passed a massive change to United States tax policy. Those changes were largely geared towards large, wealthy estates being able to pass on a greater amount to heirs of the estate without worrying about estate or gift taxes.
In this article, we will cover some of the ways in which you should consider altering your estate plan now, so you can take advantage of the wealth-protection provisions in the 2017 tax law. That is because there is a chance, given President Biden’s recently announced American Families Plan, that tax policy could change once again.
If, after reading this article, you have additional questions about the Florida estate planning process, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA. Call today at 561-656-0200 or fill out our online contact form.
The 2017 Tax Plan: Raising the Federal Estate Tax Exemption
In 2017, we saw significant changes to tax policy in the United States. One major change was the federal estate tax exemption amount, which is the amount on which you do not need to pay any estate taxes. Compared to 2016, the exemption amount doubled to $11.7 million. Additionally, the exemption amount for the generation-skipping-transfer tax was doubled as well.
What does that mean? It means that any estate with assets up to $11.7 million does not have to pay any estate taxes when the estate hold passes away. Those exemptions, however, “sunset” in 2026. That means that the exemption amounts will revert back to the old numbers on January 1, 2026. Though that is about five years away, you may be surprised how quickly that time can go. So it is important to act now to preserve your wealth.
Estate Taxes by the Numbers?
For 2021, the exemption threshold for estate taxes is, as noted, $11.7 million (an increase from the 2020 threshold of $11.58 million). If you are married, this threshold is doubled which means you can protect up to $23.4 million in 2021.
In short, that means that your estate does not need to pay any taxes at your death for assets up to $11.7 million. If your estate is worth more than $11.7 million figure, then anything over that figure is subject to Federal estate tax.
Does the State of Florida Have Estate Taxes?
There is currently no estate tax in the State of Florida, nor is there an inheritance tax in Florida. However, be sure to consult an experienced estate planning attorney for your estate planning in 2021 because other States’ inheritance taxes could apply.
For example, in New York, the inheritance tax may apply to you even if you live out of state. You will need to check the laws of the State where the person you are inheriting from lived.
Do I Need an Estate Plan if My Estate is Valued Less than $11.7 Million?
The answer is “yes.” Even though your estate is under the current threshold, remember that the 2017 law is set to return to the old values in 2026, and the parts of the American Families Plan could go into effect even sooner.
That means that if you have an estate worth $7 million and you do nothing now, you could lose the opportunity to shield your estate from any estate taxes when the exemption reverts to pre-2017 numbers, or when a new tax policy goes into place.
Consider consulting with an estate planning attorney to make sure your plan still lines up with your final wishes.
What To Do If Your Taxable Estate is Over $11.7 Million.
Simply put, you may want to consider giving away more of your money. Because of the increase in the exemption amount to double what it was before, you have a unique opportunity to make larger gifts that are tax-free.
The Best Ways to Make Gifts to Reduce Your Taxable Estate
You can make annual exclusion gifts for educational or medical purposes. The annual exclusion limit is $15,000 per donee. So, if you and your spouse split the gifts, you can give away $30,000 each year without using any of your lifetime exemptions.
It’s important to note, that in order for your gift to qualify as a ‘freebie’ you must make your give to the provider. For example, if you want to pay your grandchild’s college tuition, then do not give the money directly to your grandchild. Instead, make the payment directly to the college.
Work with Estate Planning Lawyers in Palm Beach for Your Estate Planning in 2021
At Doane & Doane, we help you determine the best tools to plan for life’s eventuality. Let us help you. We at Doane & Doane combine big firm resources and experience with the personal touch of a small, boutique firm. We pride ourselves on offering the kind of one-on-one attention that clients at big firms often do not enjoy.
After almost two decades of practice, we have earned the reputation of one of West Palm Beach’s prominent tax and estate planning law firms. In particular, we understand that estate and probate matters involve a great deal of emotion. We are privileged to help clients on such important matters, and we genuinely care for and support our clients and their families.
We hope that all of our clients, friends, and business associates enjoy the hospitality of our firm’s legal staff. Doane & Doane serves clients in the communities along Florida’s Gold Coast and Treasure Coast, including Palm Beach, Broward, Miami-Dade, Indian River, St. Lucie, and Martin counties. For a free consultation and to get to know our firm, please give us a call at 561-656-0200.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.