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At Sessa & Dorsey, one of our goals is to keep our clients up to date on the latest news and trends on anything estates and trusts related—including tax laws. As of January 1st, there is a small change to the federal gift and estate tax exemptions. Additionally, with the inauguration of the new president in a matter of days, there may be future changes to the tax laws. Of course, tax laws are affected by any new president—regardless of their political party—but January is an important time to reflect on the current status of tax laws and decide whether to take advantage of them now, or wait for possible changes.
Federal Gift & Estate Tax
The federal lifetime gift tax exemption is the amount an individual can transfer tax-free during their lifetime. As of January 1, the federal lifetime gift tax exemption amount was increased from $11.58 million to $11.7 million. Any amount used during your lifetime consumes an equal amount of your federal estate tax exemption. Any amount which you gift above the threshold is taxed at the federal gift tax rate of 40%.
The federal estate tax exemption is the amount an individual can transfer upon death. As of January 1, the federal estate tax exemption amount was increased from $11.58 million to $11.7 million. Again, this amount would be reduced by any gifts that consumed a portion of your gift tax exemption. Any amount above the threshold is taxed at the federal estate tax rate of 40%.
What You Should Do
Fortunately, there are several options to take advantage of the current federal gift and estate tax exemptions. An experienced estate planning attorney, like the attorneys at Sessa & Dorsey, are prepared to address the exemptions and the possible changes to come. We recommend that you consult with your trusted estate planning attorney to determine the best options for you and your heirs. In some cases, you may want to gift part of your estate now, in other cases you may want to set up different types of trusts to receive the current benefits and protect your wealth from future changes in the law. The solutions will differ based on your estate and your wishes.
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