In response to the pandemic, the Internal Revenue Service has extended the federal income tax filing and payment due date for 2020 income tax returns from April 15, 2021, to May 17, 2021. COVID-19 restrictions have limited office hours and in-person appointments tax preparation appointments. Last year at the height of the pandemic, the IRS extended the 2019 tax deadline by 3 months.
The IRS tax extension also applies to all taxpayers including individuals, trusts and estates.
Federal gift, estate and generation-skipping tax payments will now be due on May 17, 2021.
An estate is taxed up to a 40% rate, depending on your income.
Generation-Skipping Transfer (GST) Taxes
Federal and Illinois tax laws provide an opportunity to transfer significant amounts of wealth through generation-skipping transfer (GST) taxes.
1. You can transfer up to $11.40 million — the same as the estate tax exemption — in a generation-skipping trust and only the estate tax applies, or $22.80 million if you’re married.
2. Any money beyond $11.40 million is subject to the generation-skipping transfer tax, which is a flat 40% tax.
3. GSTs are not only for blood relatives. You can designate anyone at least 37.5 years younger than you and who isn’t your spouse or ex-spouse as the recipient of funds in a generation-skipping trust.
4. You can specify that the funds in a GST are for a specific purpose such as education or the purchase of a first home.
Changes in the tax code make it easier to gift money to your heirs before you die. In 2020 the annual exclusion was $15,000 – which means you can gift anyone up to $15,000 per year without triggering gift taxes.
On January 1, 2026, the federal gift, estate, and GST exemptions will be cut in half.
If you are planning your estate and have questions about estate, gift and GST taxes, an experienced estate planning lawyer can advise on the best way to protect your heirs and loved ones by reducing taxes on their inheritance.
Do you have questions about taxes and 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 630-864-5835.
We provide legal services in Cook, DuPage, Kane, Lake, and Will counties.