by Justin M. Kennedy
Litherland, Kennedy & Associates, APC, Attorneys at Law
The IRA has announced the new Estate Tax Exemption amount (hereinafter “Exemption amount”) for 2020. The new Exemption amount will be Eleven Million Five Hundred and Eighty Thousand Dollars ($11,580,000). This Exemption amount is per U.S. Citizen – meaning a married couple may pass over Twenty-Three Million dollars Estate Tax free ($23,160,000 in 2020).
To provide historical context, in 2002 the Exemption amount was $1,000,000. By 2006, the Exemption amount had increased to $2,000,000 and by 2010 the Exemption amount had increased to $5,000,000.
During this period, the increases to the Exemption amount were temporary, the Exemption amount would increase for some period of years but then that increased Exemption amount would expire and return to the $1,000,000 threshold.
In 2013, the American Taxpayer Relief Act increased the Exemption amount to $5,000,000 (adjusted for inflation) with no expiration date.
In 2018, the Tax Cut and Jobs Act increased the Exemption amount to $10,000,000 (adjusted for inflation to 11,180,000 in 2018, $11,400,000 in 2019, and $11,580,000 in 2020). The increase from the Tax Cut and Jobs Act is set to expire at the end of 2025 and in 2026 the Exemption amount will return to the $5,000,000 (adjusted for inflation) as set by the American Taxpayer Relief Act.
If your estate exceeds the Exemption amount, then anything above the Exemption amount will be subject to a 40% flat tax.
The annual gift tax exclusion is set to remain at $15,000 per person per year.
- Reasons an Estate Plan Could Be Challenged: Part 1 – Formal Requirements - January 24, 2020
- Estate Tax Exemption Amounts to Increase - November 6, 2019
- Beneficiary Designations, etc., Aren’t a True Substitute for a Trust - March 6, 2019