Estate Tax Planning

As of January 1, 2020, the estate tax exemption is $11,580,000. This is all thanks to the Tax Cuts and Jobs Act of 2017. However, that amount is slated to be reduced back down to $5,600,000 adjusted for inflation since 2017 in 2026. However, Congress with the President can change it at any time.

Therefore, the first and most important point is if you believe your net worth will likely be under $5,600,000 when you are gone, you do not need to worry about the estate tax. You do not need to read any of the below unless you are curious.

Portability of unused exemption: The Act allows the executor of a deceased spouse’s estate to transfer any unused estate or generation-skipping transfer tax exemption to the surviving spouse. Hence, a couple who both die in 2020 will have a combined $23,160,000 estate tax exemption. The executor of the estate of the deceased spouse must file an estate tax return to elect to pass along the unused exemption to the surviving spouse. Such return must be filed even if the estate of the deceased spouse is under $11,580,000. Therefore, we believe, to be safe, every estate of a spouse who dies and has over $2,000,000 in assets should consider filing an estate tax return just to be safe, to make sure the surviving spouse can use all the remaining exemption of the deceased spouse. You never know.

Hence, if your estate is over $5,600,000 you should consider Estate Tax Planning.