I often meet with families because of an important life changing event (marriage, death, birth, special needs, etc.). These common events provoke families to start thinking about their demise and how to best leave their legacy to their loved ones. Another event that typically triggers families to discuss their estate plan is during an election year. As we know this election year has been coined has an election year that will go down in history. Across party lines there are differing views on topics of future income tax rates, capital gains tax and estate tax. Regardless of who is in office in January 2021, there is no better time than now to review your estate plan.
One such tax that has received a spotlight during the presidential race is the federal estate tax, or otherwise known as the ‘death tax.’ The current federal estate tax exclusion amount is $11,580,000 per taxpayer, or $23,160,000 for a married couple (indexed for inflation). The current exclusion is set to expire at the end of 2025.
For some reading this, you might think that the federal estate tax will never be imposed on your estate after you pass away. Depending on who is elected President, this exclusion amount may be drastically reduced, thereby imposing a death tax on a greater number of estates.
Here is a glimpse of how the exclusion amount has changed over time –
Year Exclusion Amount
Regardless of who will be the President for the next four years, it is important that you have your estate plan reviewed. There are important tax planning strategies through a properly drafted estate plan to help mitigate the devasting impact a death tax can have on your family.