And Just Like That: No Estate Tax Changes for 2021 (But 2022?)

By: Mary Anne Cody

The much discussed proposed changes to federal gift and estate taxes has not materialized for 2021.

Instead as the law now exists there are more planning opportunities available for 2000.  For 2022 the annual gift tax exclusion amount (the amount you can gift to a person without having to utilize the unified credit) will rise to $16,000/person.  So, in 2022 a husband and wife can elect to gift-split and make combined non-taxable gifts of $32,000/per recipient.

The estate/gift unified credit amount will be $12,060,000 for 2022.  This is the amount each individual has to apply against taxable gifts during lifetime or at death.  This amount is scheduled to sunset at the end of 2025 and as of January 1, 2026 will be approximately half of the current amount.  If your estimated taxable estate would approximate these amounts, careful consideration is needed to utilize this exemption while it is still available. This additional year is an opportunity to act, either to gift directly to the next generation, to make plans to leverage the credit with discounted gifting, or to gift now to non-monied spouse for a possible spousal limited access trust to be considered in the future.

As Senator Manchin has indicated he will reconsider support of the Build Back Better Bill if taxes on high net-worth persons are included, continuing to watch what transpires in Washington is very important.

In addition residents of New York must also keep in mind that the New York State estate tax is applicable to estates currently over $5,930,000; and the New York “cliff” removes the exemption amount if an estate is over this exemption amount by 5% or more. In addition the NYS estate tax credit is not portable between spouses, so a balancing of assets between spouses should be considered to benefit the family overall.

It is always a good idea to review your estate planning documents and make sure your plan still work for your family as it exists now and at the same time determine if any tax planning should be done.