For individuals and couples with a high net worth and a significant amount of assets, it is essential that you look at all ways to ensure your estate goes to your heirs and not to Uncle Sam.
After all, at the end of 2025, the 2017 Tax Cuts and Jobs Act, commonly known as the Trump Tax Law, will most likely expire. Along with that expiration is a significant exemption for estate taxes that could be cut in half.
Plus, depending on who is in control of the federal government after the election, the estate tax exemption could decrease even further.
Included in that is a significant reduction in the estate tax exemption, reducing the amount one can pass on to heirs by more than $7 million.
Plus, depending on who is in the White House and who controls Congress, the exemption could be much lower.
One way to help lower the tax burden, allowing your heirs to keep more of your estate is by utilizing the lifetime gift exemption in the next two years.
The attorneys at The Orlando Law Group can work with you to find ways to limit your estate’s tax liabilities, regardless of who is in office.
Why should we act now?
We’ve discussed this in other articles, but it will be very difficult to extend the estate tax exemption past 2025, which is set to sunset at that time. That is because the exemption is not something easily overturned.
Right now, the lifetime gift exemption is $13.61 million for an individual and $27.12 million for a couple. On January 1, 2026, that number drops back to $7 million for an individual and $14 million for a couple.
Plus, Kamala Harris has said she would like to lower that even further if she wins the November election
The time to act on your estate plan and the transfer of any wealth accumulated must happen soon to ensure you are protected.
How does the lifetime gift exemption work?
The lifetime gift exemption is just like any other gift exemption, except it can only be done once.
Many people are familiar with the annual gift exemption where you can provide your children and their children with an annual gift of $18,000 per individual or $36,000 per couple.
With a lifetime gift exemption, those are no longer allowed. Instead, you are making a one-time gift of up to $27 million to your heirs from one couple.
Of course, you can just write a check, but we do not advise that even if an heir is responsible and an adult. Instead, we suggest looking at establishing a trust that includes specific distribution rules for your heirs.
For instance, a Spousal Lifetime Asset Trust, an irrevocable trust or any of the types of trusts we outline in this article.
Why should I give the full gift now?
While there may be concert concerns about relinquishing so much of your assets at one time. And, to be clear, there is no going back. It is a permanent gift, nonrevocable after it is done.
But look at this graphic from Merril Lynch that shows how much could be saved.
Plus, those assets can still build in value and interest, but the capital gains tax and any income taxes that could be paid in the future from the gift are less than the estate tax.
Of course, it’s also important to carefully decide which assets to put in the estate. Putting an asset that could significantly increase in value could create more tax burden for your heirs.
When do I need an attorney?
When you are giving this type of gift, it is important to ensure the legal documents and requirements that go with that gift are clear and concise – and legal.
The attorneys at The Orlando Law Group can work with you, your financial planner and your accountant to ensure you and your heirs will lose as little as legally possible to the IRS.
The attorneys at The Orlando Law Group can these types of issues in Orlando, Waterford Lakes, Altamonte Springs, Winter Garden, Lake Nona, St. Cloud, Kissimmee, and Central Florida.
If you have questions about anything discussed in this article or other legal matters, give our office a call at 407-512-4394 or fill out our online contact form to schedule a consultation to discuss your case. We have an office conveniently located at 12301 Lake Underhill Rd, Suite 213, Orlando, FL 32828, as well as offices in Seminole, Osceola and West Orange counties to assist you.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.
Last Updated on October 11, 2024 by The Orlando Law Group