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January 6th, 2020
Increased Exemption for 2020 Creates Estate Planning Opportunities
The Federal estate, gift and generation-skipping transfer (GST) tax exemption amounts have increased in 2020, to $11.58 million per individual.
A married couple may now transfer a total of $23.16 million free of Federal estate, gift and GST taxes, either during life or at death. Even a married couple who utilized full Federal exemptions in prior years will have additional exemption available for lifetime planning in 2020. For example, a married couple who used $10.24 million of Federal exemption in 2012 (the maximum in that year) would now have an additional $12.92 million of Federal exemption.
Absent intervening legislation, the Federal exemption amount will be increased for inflation each year until January 1, 2026, when it will return to $5 million, adjusted for inflation. IRS regulations now provide that individuals who use the increased Federal exemption amount for lifetime gifts will not be adversely affected by a decreased Federal estate tax exemption after 2025 (i.e., no “clawback” if the exemption amount in the year of death is lower than the amount of exemption used during life).
Annual gift tax exclusions are available in addition to the Federal gift tax exemption. Each year an individual may make gifts of $15,000 (or $30,000 for married couples) to an unlimited number of recipients without using up any part of such individual’s Federal gift tax exemption.
When evaluating your estate plan, it is also important to consider recent developments in state laws:
The New York estate tax exclusion in 2020 is $5.85 million, scheduled to increase annually for inflation. The benefit of the exclusion is “phased out” for taxable estates between 100% and 105% of the exclusion amount, and eliminated entirely for taxable estates that exceed 105% of the exclusion amount. As a result of this “cliff,” if a taxable estate exceeds 105% of the exclusion amount, the entire taxable estate will be subject to the New York estate tax (applied at graduated rates).
There is no separate gift or GST tax in New York. However, taxable gifts made by a New York resident prior to December 31, 2025 and within three years of death are added back to and taxed in the resident’s estate.
The Connecticut estate and gift tax exemption in 2020 is $5.1 million, and will increase to $7.1 million in 2021, and $9.1 million in 2022. Beginning in 2023, the Connecticut exemption will equal the Federal exemption (as adjusted for inflation). There is no separate GST tax in Connecticut.
New Jersey repealed its estate tax entirely, effective January 1, 2018. However, New Jersey has retained its separate inheritance tax, which is based on the relationship between the decedent and the beneficiary. Transfers to a spouse, child, stepchild or grandchild of the decedent are exempt from inheritance tax. There is no separate gift or GST tax in New Jersey.
The 2020 estate tax exemption amounts:
If you have questions about these recent changes, or about other estate and tax planning matters, please contact Barbara E. Shiers at (212) 826-5526 or firstname.lastname@example.org, Linda J. Wank at (212) 826-5546 or email@example.com , or any other member of the Frankfurt Kurnit Estate Planning & Administration Group.
Other Estate Planning Law Alerts
New York State Surrogate’s Courts Continue to Reopen
After weeks of uncertainty regarding commencement of probate petitions and the admission of Wills to probate, the New York State (NYS) Surrogate’s Court system has taken steps toward reopening for both essential and non-essential matters. Read more.
June 1 2020
Remote Document Execution: Current Rules in New York, New Jersey and Connecticut
For the past month, we have been supervising the execution of our clients’ Wills and related estate planning documents through the use of audio-video technology, allowing for the completion of planning projects while maintaining appropriate social distancing. We conduct these signing conferences through the use of various technological platforms, depending on clients’ preferences or limitations – and all coordinated with clients beforehand. Read more.
May 11 2020
Estate Planning Opportunities During the Pandemic
The pandemic’s effect on the economy has led to reduced valuations for many privately-owned and publicly-traded businesses, as well as reduced valuations for real estate and other assets. At the same time, interest rates remain at historically low levels. This unique economic environment can create estate planning opportunities for certain individuals and families. Read more.
May 4 2020