An election year can bring about changes that affect estate planning goals, especially for those with considerable wealth and assets.
The Internal Revenue Service has announced 2021 limits for estate and gift taxes. Reviewing your estate plan by the end of 2020 will ensure that you are prepared for any eventuality in the coming year.
The new IRS numbers
In October 2020, the IRS announced that for 2021, the estate and gift tax exemption per individual is $11.7 million: in 2020 the exemption was $11.58 million. What this means is that you can leave $11.7 million to your heirs without having to pay federal estate or gift taxes, or you and your spouse can leave $23.4 million.
Annual gift exclusion
The IRS also stated in its announcement that in 2021 the annual gift exclusion remains the same at $15,000. This means you can give away $15,000 to as many people as you wish without having to pay federal gift tax. In fact, you and your spouse can each give away gifts of $15,000.
When you make gifts that exceed the $15,000 annual exclusion, you use the lifetime gift-estate tax exemption. However, this is just one piece of the puzzle that may develop into something bigger and more complicated in the coming year. You may want to consider the benefits of spousal lifetime asset trusts or grantor-retained annuity trusts. With 2021 just around the corner, there is much to learn about the overall tax picture, what changes may occur and how they will affect your estate planning goals. This is a good time to give such matters your undivided attention.