Legal Blog
The Weekly Scenario: Uncertainty and Opportunity in 2021
Is Now the Time to Make a Substantial Gift?
As I reported last week, we may soon see a rollback in the ‘Trump’ tax cuts. Such a roll-back might even be made effective retroactively to January 1, 2021.
Most of the changes made by the Tax Cuts and Jobs Act of 2017, as related to individuals, are already set to expire after 2025. Under this act, we now have an estate, gift, and generation-skipping transfer tax exemption amount of $11,700,000 per person. This exemption amount is up from $5,490,000, where it stood in 2017 prior to the ‘Trump’ tax cuts taking effect. This means that until the end of 2021, an individual dying or making a large gift can pass up to $11,700,000 free of any federal transfer tax. Thereafter a roughly 40% tax on the fair market value of the estate or gift would be paid. For married couples, they can now pass up to $23,400,000 (federal estate/gift/generation-skipping).
The individual exemptions may likely roll back soon to around $5 million per donor or even $3.5 million per donor.
On November 26, 2019, the IRS issued a regulation under IR-2019-189 that there would have been no “clawback” for any gifts made in 2020. Thus, if an individual had given up to $11.5 million in 2020, and the related exemption amount was reduced in 2021 to something less than that, then the difference between those amounts would not have been added back when computing the value of the taxable estate when the donor later dies. This is the “use it or lose it” approach that many people talk about in trying to figure out whether to make a large gift. While it is likely the IRS would do this again; there are no guarantees.
The analysis to figure out whether a gift might be beneficial to a family is difficult and requires many different factors. Some of the factors include the total estate value, the health of the family member, the income tax basis of the estate assets, the charitable giving goals, prior gifts, the desire to retain control over the use of assets, and the readiness of beneficiaries to receive a large gift.
Keep in mind that a gift doesn’t have to be made directly to an individual beneficiary. It can be made in trust, for example, given a person access to the property but not ownership or control.
As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
ABOUT STEVE SHANE
sshane@offitkurman.com | 301.575.0313
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts, and a charitable trust. He is also experienced with drafting documents for business planning, the incorporation, and application for exemption for Private Foundations and the administration of decedents’ estates.
ABOUT OFFIT KURMAN
At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we focus on furthering our clients’ objectives and provide timely services and within budget, all while focusing on the clients’ interests and goals.
Offit Kurman is one of the fastest-growing, full-service law firms in the United States. With over 230 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well-positioned to meet dynamic businesses’ needs, as well as the needs of the people who own and operate them. We also provide representation of individuals and families in diverse matters ranging from estate planning and asset protection to intellectual property structuring and entrepreneurial start-ups. Our International Group provides clients with a broad range of services for transactions and dispute representation for clients worldwide, including Europe, Canada, Asia, Latin America, the Middle East and Africa.
At Offit Kurman, we distinguish ourselves by the quality, breadth, and global reach of our legal services — as well as our unique operational structure, which encourages a culture of collaboration and entrepreneurialism. The same approach that makes our firm attractive to legal practitioners interested in representing clients in the middle market, also gives clients access to experienced counsel in almost every area of the law and in many jurisdictions in the U.S. and abroad
Subscribe and follow us on our Blog, and on Facebook, Twitter, Instagram, YouTube, and LinkedIn. You can also sign up to receive LawMatters, Offit Kurman’s monthly newsletter covering a diverse selection of legal and corporate thought leadership content.
DELAWARE | MARYLAND | NEW JERSEY | NEW YORK | NORTH CAROLINA | PENNSYLVANIA |SOUTH CAROLINA | VIRGINIA | WASHINGTON, DC
