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“Last Call” for Current Estate and Gift Exclusion?

Could it be the “last call” for making gifts under historically high estate and gift tax exclusion amounts?

Beginning with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), we have seen a seemingly ever-increasing estate and gift tax exemption, and even a temporary repeal of the estate tax in 2010.

In 2002, EGTRRA increased the estate tax exemption from $675,000 to $1,000,000 and laid the foundation for a series of increases, up to $3,500,000 in 2009. EGTRRA also provided a brief repeal of the estate tax in 2010, followed by a return to pre-EGTRRA rules in 2011. The 2010 Tax Relief Act retroactively reinstated the estate tax and gave us a $5,000,000 exemption through 2012. This was followed by the American Taxpayer Relief Act of 2012 (ATRA) which permanently extended the $5,000,000 estate tax exclusion (to be adjusted for inflation), and the Tax Cuts and Jobs Act of 2017 (TCJA), which doubles the exclusion for taxable years beginning 2018 through 2025 (also adjusted for inflation). This brings us to the $11,580,000 exclusion amount we have today in 2020.

In addition to increasing the estate tax exclusion, the ATRA also unified the estate and gift tax exclusions. This unification allows taxpayers to utilize their full $11,580,000 exclusion (2020) to make gifts during their lifetime.

It has been said that “the only constant in life is change.” While the current law gives us historically high exclusion amounts through 2025, there is no guarantee it will stay in effect through 2025. Ever increasing national debt, rising unemployment, an unstable political environment, and a presidential election in November are all serious factors.

Do not wait until it is too late to take advantage of the historically high estate and gift tax exclusions. Windes can help you benefit from these exclusions before they vanish.

If you have questions or would like more information, please contact Kevin Wiest at kwiest@windes.com or 844.4WINDES (844.494.6337).

Kevin Wiest, CPA, MST

Partner, Tax & Accounting Services

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