Updated: Apr 15, 2021
The IRS announced the new estate and gift tax limits for 2021. The estate and gift tax exemption is $11.7 million per individual. This means an individual could leave $11.7 million to heirs and pay no federal estate or gift tax. A married couple could leave $23.4 million to heirs.
During his presidency, Donald Trump doubled the estate and gift tax exemption from $5.49 million in 2017 to $11.18 million the following year. Trump's tax overhaul extends through year-end 2025. However, Biden has proposed restoring estate and gift taxes to their levels in 2009: $3.5 million per person for the estate tax and $1 million for the gift tax.
If you are wealthy and want to take advantage of the high exemptions, now is the time to do some gift planning. The IRS finalized rules saying it won't come back on lifetime gifts if/when the exemption is lowered. This means that individuals taking advantage of the increased exemption amounts in effect from 2018 to 2025 will not be adversely impacted after 2025.
Forbes explains it this way: "Here’s how this works on the most basic level: Say you put $9 million in a trust for your heirs this year, and you die in 2026 when the estate tax exemption reverts to $5 million. Your estate wouldn’t have to pay tax on that extra $4 million gift. Instead, the IRS rules say that the full $9 million in this example would be exempt forever." It's important to note that this only works for gifts made during 2018 to 2025.
Additionally, the annual gift exclusion amount for 2021 is the same as last year: $15,000. This means an individual can give $15,000 with no federal gift tax consequences. A married couple can each make $15,000 gifts.
If you are ready to do advanced gift planning, contact one of our attorneys. Our experienced estate planning attorneys can help you create an estate plan that accomplishes goals specific to you and your family.