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Wills, Trusts & Estates: Plain and Simple – Estate and Gift Taxes for 2020: Is It Better to Make A Large Gift Sooner Rather Than Later?

February 18, 2020

Under the federal tax law, the amount of each person’s federal estate and gift tax exemption, combined, is $11.58 million in 2020 (and scheduled to increase annually for inflation though 2025). This exemption amount applies to the total taxable gifts made during an individual’s lifetime and the value of property transferred at death to someone other than a spouse or charity. Once the gifts combined with transfers at death exceed $11.58 million, a federal tax of 40% will be imposed on the amount exceeding $11.58 million.

This gift and estate tax exemption amount of $11.58 million per person only lasts though December 31. 2025. Beginning January 1, 2026, the federal combined gift and estate tax exemption will go back to $5 million, indexed for inflation. Individuals using the increased exemption amount prior to 2026 can, however, take comfort. The Internal Revenue Service has issued a directive making clear that gifts made between now and December 31, 2025, totaling no more than the higher exemption amount will not be subject to additional gift and estate taxes after the federal exemption is reduced in 2026.

Reprinted with permission from Lloyd Harbor Life, February 2020. 

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