New Restrictions On The Gift Tax Exclusion Will Soon Go Into Effect, But How Soon?
Estate planning lawyers like to keep things light during the first few meetings with clients. It’s easy to think about estate planning as being about enjoying life when, unless life takes an unexpected turn, you will still be here to enjoy life when all that is left of the clients in whose faces you are smiling is their estate. Fear, not hope, is what motivates most people to make the first click on an estate planning law website. The annual gift tax exclusion is a great way to start the conversation about your estate plan. It’s altruistic, it is relatively low stakes, and it leaves coal in the stockings of the IRS; the young folks might even call that gamification. What could be more fun than saving money on taxes than giving your grandchildren $15,000 to spend on college tuition or a summer of travel? As it stands, the current lifetime gift tax exclusion is set to sunset at the end of 2025, greatly reducing the amount of tax-free gift money you will be allowed to gift in a lifetime. The Build Back Better plan, the federal government’s plan for economic recovery after the setbacks of the COVID-19 pandemic, may make even bigger cuts to these tax breaks even sooner. This year, you should hand out cash gifts like it’s your last chance, and then consult an Orlando estate planning lawyer about what to do in upcoming years.
Even the Biggest Scrooge Should Want to Be Generous This Year
People who gift large tax gifts must pay a gift tax, but amounts low enough to be eligible for the annual gift tax exclusion are tax free. In 2021, the maximum amount of money you can give a person is $15,000, but you can give gifts of up to this amount to as many people as you choose. For example, if you have five grandchildren, you can give them each $15,000 this year without paying taxes on the gifts. You can do this year after year, and you will not have to pay any taxes unless you are truly wealthy; the lifetime limit is $12.6 million.
In 2026, when the current gift tax exclusion law sunsets, the lifetime limit will change to $6.2 million. This may sound like the very definition of a high-class worry; this change only affects you if your net worth is at least $6.2 million. Of course, the law may change sooner, and the exclusion limit may become even lower than $6.2 million; discussion about these details is still ongoing in the federal government. What is clear is that 2021 is the year to give generous cash gifts.
Reach Out to Us Today for Help
An Orlando estate planning lawyer can help you keep up with the changing laws on gift taxes and estate taxes. Contact Gierach and Gierach, P.A. for more information.