Q: Do I Need to Be Taking Advantage of the All-Time High Estate Tax Exclusion Amount?

On Behalf of | May 26, 2021 | Estate Planning, Q&A |

A: It’s definitely a topic worth discussing with an estate planning attorney! Did you know that the estate tax exclusion is currently at a record-high of $11.7 million per person? However, it is widely expected that this number will not be this high for much longer. Specifically, there are currently several proposals out there to reduce the exemption amount to as low as $3.5 million per person, effective as soon as January 1, 2022. Given this possibility, combined with the fact that the exclusion is set to automatically go back down in 2026, many Estate Planning attorneys are advising their clients to consider making large gifts now while they can still take advantage of this historical opportunity to pass wealth from one generation to the next, free of tax.

Having said that, however, not every asset should necessarily be gifted without thoughtful consideration first. In general, the most tax-effective assets to gift would be those with a tax basis close to their current fair market value, especially if those assets are expected to appreciate in value; one great example would be a recently inherited piece of real property. On the other hand, if the client were to gift an asset that has already appreciated significantly, their heirs would lose the step-up in basis at their death. In summary, to the extent you are able to gift cash or relatively high basis assets, that would be the best use of your exclusion.

If you have specific questions regarding this subject or otherwise want to discuss estate planning for your family, please contact us any time at (707-681-5851 or [email protected]) or set up a complimentary consultation at your convenience by clicking on the following link: https://MyNapaLawyer.as.me/.