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  • Writer's pictureDr. Mark Lee Levine, Professor

Estate Planning: Should You be Making a Major Gift, Now, Before the Elections?

The presidential elections will soon be here and possible tax changes could reduce the estate and gift tax lifetime exclusion.

One often noted tax provision change that Candidate Biden has said he will undertake is the current life time exemption for gift and estate tax transfers. The current exemption for a US citizen is $11, 580,000 in 2020. Thus, in combining taxable gifts (that, is those beyond the annual exclusion allowed, today, of $15,000 for each gift to a given individual), a taxpayer can also give a maximum amount of the $11,580,000, noted above, whether during the life of the grantor or on the death of the given grantor.

As an example, if Husband (H) and Wife (W) choose to give a gift during their life, each can give, without a gift tax transfer tax, the sum of up to $15,000. Thus, if each would choose, they could give child X-1 (or a non-related party), $15,000, each. Thus, X-1 could receive $15,000 from H and $15,000 from W, per the annual exclusions allowed under the Federal Internal Revenue Code. (A given state might or might not have a gift tax-as well as exemptions from such tax.)

Beyond the annual exclusion noted above, there is the Lifetime exemption. The Lifetime exemption, noted above, has not always been so high. It has grown over the years. (It apparently will move to $11,700,000 in 2021, absent other changes by Congress and the President.) It is this concern with future tax legislation that gives rise to this discussion.

The issue as to avoiding such gift and/or estate tax, by using the lifetime exemption noted above, is whether this exemption will continue to exist and the amount of the same. Why is this question being raised? Because Candidate Biden has stated that he intends to substantially reduce the lifetime exemption, described above. Thus, the concern for those individuals planning ahead as to gifts is to consider using the lifetime exemption, now. For example, if H or W were to make a gift, today, in 2020, of say $11,580,000, such gift, assuming the full exemption is available, would provide for H or W to avoid paying any Federal Gift Tax.

But, what if such gift was made and then the lifetime exemption is reduced to say $5 million for 2021 and forward? Would H or W have to pay tax for the prior gift? The answer, by the IRS, is that no such tax would be owing. Thus, this exemption might encourage one, if they desired to make such a gift and had the means for the same, to make the gift, now! ( Maybe the worry is for naught. Maybe Trump will win; maybe, if Biden is President, he will not, with Congress, change the law; or maybe, as speculated, the entire estate tax and gift tax will be repealed.)

However, the question remains: Should one be cautious, now, and take advantage of this sizable exemption that exists, today?

This topic is one that each taxpayer, who fits within the possible description of a large donor as mentioned above, should discuss with his or her tax attorney, CPA, financial consultant or other informed advisor. It may be too late to take advantage of this option, once the elections have taken place in 2020!


Dr. Mark Lee Levine,

Professor, University of Denver

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