The 2017 Tax Cuts and Jobs Act (TCJA) changed the lifetime gifting and estate tax exemption and the generation-skipping transfer tax exemption (GST), Beginning in 2021, a married couple can theoretically transfer up to $23.4 million free of federal transfer tax – an unprecedented amount. The Federal gift, estate and generation-skipping transfer (GST) tax exemptions (i.e., the amount an individual can transfer free of any of these taxes) are now $11.58 million per person and will increase to $11.7 million in 2021. Federal and Illinois tax laws provide an opportunity to transfer significant amounts of wealth free of any federal gift, estate and generation-skipping transfer (GST) taxes. Some of the gifting provisions “sunset” on January 1, 2026, which make now an ideal time to review your estate plan to ensure that you are making full use of this opportunity. Your 2020 year-end estate plan gifting should consider the current tax laws as well as changes in your personal circumstances.
Current Exemption Levels
On January 1, 2026, the federal gift, estate, and GST exemptions are set to be cut in half. You can take advantage of the increased federal exemptions by utilizing estate planning strategies such as gifting in advance of the sunset date.
• Federal gift, estate and GST exemptions are currently $11,400,000 for each individual, increasing to $11,580,000 in 2020.
• For married couples the exemptions are currently $22,800,000, increasing to $23,160,000 in 2020.
Tax laws change when Congress changes, and the 2020 election could impact Illinois estate planning. During the presidential campaign, Presidential candidate Biden campaigned for a “rollback” of these increased federal transfer tax exemptions, which could include reducing the $11.7 million transfer tax exemption for 2021 to $5.85 million, or even as low as $3.5 million, potentially with legislation becoming effective as early as January 1, 2021.
Gifting Options
Estate planning goals change over time. Make sure that your estate planning legal documents reflect your current wishes and strategically account for federal and state tax exemptions so that your beneficiaries and heirs and protected.
• Lifetime utilization of transfer tax exemption.
• Annual exclusion gifts.
• Tuition and medical gifts.
• Gifts to spousal lifetime access trusts.
• Grantor trusts.
• Combining gifting and selling assets to grantor trusts.
There are many year-end benefits to reviewing your estate plan in addition to gifting and gift taxes. Revisions to your legal documents may be necessary if your family circumstances have changed significantly, such as a birth, death, wedding, divorce or relocation to another state.
Learn More: Impact of President-Elect Biden on Estate Planning
Do you have questions about estate planning? Our experienced estate planning lawyers in Lombard, Illinois can advise you on the best options to protect your assets and loved ones. To talk to an estate planning attorney contact the Estate & Probate Legal Group at 630-687-9100.
We provide legal services in Cook, DuPage, Kane, Lake, and Will counties.
