Changes to Estate Tax Threshold
Currently, the estate tax exemption amount for 2021 is $11,700,000.00 per individual ($23,400,000.00 for married couples who use their estate tax credit when they die). An individual’s leftover estate tax exemption may be transferred to the surviving spouse after the first spouse’s death. The current taxable rate is 40% on the overage. Bernie Sanders’s new bill would lower the estate tax credit “coupon” to $3,500,000.00, with a combined estate tax credit of $7,000,000.00 for married couples. The taxable rates would be as follows:
Estates less than $10M – 45% tax rate
Estates $10M to $50M – 50% tax rate
Estates $50M to $1B – 55% tax rate
Estates more than $1B – 65% tax rate
What does this mean?
This means that an individual who dies with assets that are valued over $3,500.000.00 would owe 45% in taxes on the overage (or more) of that threshold (see example calculation below).
What is included in your taxable estate?
Taxable estate assets include: Trust and Probate Assets, life insurance, IRAs, joint accounts or joint property, and homestead property, along with anything else you own at your death.
EXAMPLE:
Decedent who owned assets jointly with spouse and does not have a trust-based plan funded and in place at time of death:
Individual Retirement Accounts (IRAs) $1,500,000.00
Homestead Real Property $500,000.00
Life Insurance $1,500,000.00
Investments, other Assets $600,000.00
Tangible Personal Property $100,000.00
(Cars, Furniture, etc.)
TOTAL ASSETS $4,200,000.00
(each spouse owns $2,100,000.00)
ESTATE TAXES DUE WITHOUT PROPER
TRUST-BASED PLANNING $315,000.00
$700,000.00 x 45% = $315,000.00 (Check must be written to US Treasury)
ESTATE TAXES DUE WITH PROPER TRUST
BASED-PLANNING $0.00
What should you do to avoid possible estate taxes?
Establish a trust-based plan with your spouse, then fund assets into each spouse’s trust -- we can help.
Changes to Gift Tax/Annual Exclusion
The annual gift tax exemption amount is currently $15,000.00. This means you can gift up to $15,000.00 per year to any person without reporting the gift to the IRS. Under the proposed bill, the lifetime gift tax exclusion amount will be reduced from $11,700,000.00 (a combined estate and gift exclusion amount) to $1,000,000.00 (for gifts only). The annual exclusion amount will be capped at $20,000.00 per giver. Should a gift be made over the exclusion amount, an IRS 709 gift tax return is required and accrues against the lifetime exemption amount of $1,000,000.00. Any lifetime gifts over $1,000,000.00 will be taxed as follows:
Lifetime Gifts over $1,000,000.00 will be taxed at 45% rate
Lifetime Gifts over $10,000,000.00 will be taxed at 50% rate
Lifetime Gifts over $50,000,000.00 will be taxed at 55% rate
Lifetime Gifts over $1,000,000,000.00 will be taxed at 65% rate
Connect with The Miller Elder Law Firm:
352.379.1900
linkedin.com/in/shannon-miller-b997178b
Subscribe to our YouTube channel:
Author:
Shannon Miller, Florida Bar Board Certified Elder Law Attorney and founder of The Miller Elder Law Firm, is one of the leading elder law attorneys in Florida with decades of experience advocating for our seniors and adults with disabilities. This level of expertise comes from the thousands of cases she has successfully litigated, her direct advocacy at the state legislature (including drafting legislation) to protect seniors, and collaboration with other stakeholders in improving the lives of seniors and vulnerable adults. She currently serves as Secretary of the Elder Law Section of the Florida Bar.
In addition to the expertise of the firm, what makes The Miller Elder Law Firm special is the way clients are cared for, from the moment they call or visit the office to the conclusion of their case. The mission of every staff member is to help clients through the sometimes complicated process of getting older and suffering the infirmities of aging and death with dignity and independence. The Miller Elder Law Firm team strives to provide every client with a bright retirement and end of life that is as full as possible. Everyone deserves to be heard, protected and confident in their end of life plan.
Read More
By: The Miller Elder Law Firm
Title: Estate Planning Tax Law Changes 2021 | How To Avoid Possible Estate Taxes |Miller Elder Law Firm
Sourced From: www.youtube.com/watch?v=sL34GZzWvz4
-------------------------------
