2021 Biden Administration Proposed Tax Changes: Will My Estate Be Subject to Estate Tax?
Over the course of the last several decades, the federal estate tax credit has increased to the point that only very high net-worth individuals and families need to concern themselves with estate tax planning. For the year 2021, the “applicable exclusion amount” is $11,700,000.00 per individual (23,400,000.00 for married couples). The gift tax exclusion amount is the same, that is, each individual may give $11,700,000.00 during their lifetime without incurring any gift tax. If the sum of lifetime gifts and assets transferred at death is greater than the applicable exclusion amount, then such transfers will be taxed at a rate as high as 40%.
However, the Biden administration has proposed a reduction of the applicable exclusion amount to $3,500,000.00 per person for estates, $1,000,000.00 for lifetime gifts, and increase the tax rate to up to 45%. Such a change is made more likely by the fact that, in January, the Democratic party has consolidated power in both branches of the U.S. Congress. Last year, there was even fear that, if such a change came in to effect at any time during 2021, congress could make the change retroactive to January 1, 2020, prompting many families to make gifts before the end of the year to ensure their use of the current applicable exclusion amounts.
While retroactive application to January 1 is dubious at best, changes in the near future seem likely. If the changes proposed by the Biden administration take effect, it would mean that many more families that previously were not concerned about estate taxes will be in need of tax planning. If you are interested in learning more about your trust and tax planning, do not hesitate to contact the attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist with your estate tax planning needs. Call Bart Chepenik, JD LL M at 305-613-3548 or Brad Trushin, Esq at 305-981-8889, as we are accessible to help you and your family 7 days a week.