Potential Changes to Gift and Estate Tax Laws in 2021 and Beyond

One of the biggest questions with estate planning today is when and if Congress will make changes to the current estate planning, gift, and estate tax laws in the coming days. In this article, we will make sure that you have an understanding of what these potential changes mean to you, so you can fine-tune your estate plan accordingly.  

As you will see, changes to the law may have an impact on your current estate plan. If you are just starting the estate planning process, you may want to voice any concerns to your estate planning attorney so they can be addressed sooner rather than later. 

If, after reading this article, you have additional questions about estate planning, gift, and estate tax, 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 . 

First and foremost, it is possible that the Biden administration is considering lowering the gift tax exemption.  To clarify, the gift tax exemption is the amount of money you can gift to a friend or relative tax-free.  

Currently, the exemption is a whopping $11.7 million, but President Biden has proposed bringing that exemption down to $3.5 million.  There is also some talk that there is support for bringing the exemption down to $5 million. Whatever the case, now is a good time to transfer your wealth as a gift – before the tax laws change.  

The Biden administration has also signaled that it would like to repeal tax any capital gains at the same rate as regular income – for those who make $1 million or more annually.  If you make more than $1 million per year, then now might be the time to realize any capital gains on your investments because the tax rate on that capital gains income may double.

Fortunately, only 0.1 – 0.2% of Americans make $1 million or more per year.  Thus, this change in capital gains tax will not impact the vast majority of Americans.  That said, you will want to keep these changes in mind as you plan your own estate.

It could be that both you and your spouse have used all of your exemptions and are looking for alternative ways to reduce the taxes on your estate, or maybe you are just not ready to commit to large transfers of any of your property. 

It may be possible to freeze the growth of your estate with a tool called a Grantor Retained Annuity Trust. (GRAT) . GRATs and installment sales are booming in the era of low-interest rates because your assets more than likely have increased at a rate far above the rate of an annuity. 

By utilizing a GRAT, you are essentially freezing the size of your estate and transferring appreciation that would have remained in your estate otherwise. 

With any new presidential administration, there will come changes, and tax law changes are particularly fluid from administration to administration.  That, however, should not dissuade you from waiting to engage in estate planning.  Tax laws are always somewhat of a moving target.  So, your best bet is to work with an experienced estate planning attorney, and plan for the future with all of the information currently available to you.  

Accordingly, this year, you consider meeting with your estate planning attorney to review your current plan and decide if any changes should be implemented to maximize your exemptions and achieve your estate planning goals. 

To conclude, given the possible changes to the tax laws, you may want to consider the following.  

1. Make a gift to take advantage of the current $11.7 million exemption.
2. Make a gift to your irrevocable trusts or shift any appreciation out of your current estate using such tools as intra-family loans and GRATs.
3. Remember, any tax changes are likely to take effect for the tax year 2022. 

Knowing which type of probate your estate will require is an integral part of planning for the future. Because probate proceedings can be lengthy and costly, making arrangements early can ease much of the emotional burden your successors will face when handling the affairs left after you are gone.

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 most 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.