Under tax legislation that was enacted by the United States Congress late in 2017, the federal estate, gift and generation-skipping transfer (“GST”) tax exemption increased on January 1, 2018, to $11,200,000 for individuals (twice that amount for married couples) from $5,490,000. For 2020, the exemption is $11,580,000. The exemption is scheduled to increase with inflation each year until 2025. On January 1, 2026, the exemption is scheduled to revert to the 2017 level of $5,000,000, adjusted for inflation. The highest marginal federal estate and gift tax rates will remain at 40% and the GST tax rate will remain a flat 40%.
This is all influx now due to the November 3 election of Joe Biden as the 46th President of the United States. We won’t know his exact plan until he after he takes the Oath of Office on January 20, 2021 and settles into the Oval Office. President-elect Biden and his team have communicated a desire to reduce the exemption and increase the estate and gift tax rate.
It was not that long ago, in 2001, that the exemption was a paltry $675,000 and the tax rate was 55%. It is difficult to know how low the exemption may go. Some think it will go back to $5,000,000 and others think even lower to $3,500,000. The tax rate may increase to as much as 65%. On the other hand, it may go nowhere if the Democrats do not control both houses of Congress (2 Senate runoff elections in Georgia will determine which party controls the Senate).
One thing is for certain, well, besides death, the United States estate and gift tax will be around in one form or another, for at least the next 4 years. Stay tuned to see what happens in 2021.
If you have a specific situation that you want addressed, please do not hesitate to contact us through our Consultation Form or call us at 519-252-3888. You can also visit us at www.ingenuitycounsel.com.
About Ingenuity Counsel & Michael Kennedy
Ingenuity Counsel, based in Windsor, Ontario, Canada, provides cross border tax & United States legal services to Canadians. Michael Kennedy, with close to 20 years of legal experience, and his team at Ingenuity Counsel, advise Canadians who own property in the United States, particularly Michigan, California & Florida, with respect to federal income & estate tax, estate planning & probate administration.
Mr. Kennedy is an attorney-at-law admitted in the States of California, Michigan & Florida. He is also authorized as a Foreign Legal Consultant by the Law Society of Ontario to provide legal services in Ontario respecting the laws of the United States. Mr. Kennedy provides legal advice only as it pertains to U.S. laws. Prior to establishing Ingenuity Counsel in 2012, he practiced law in the United States for more than 10 years in California, Michigan and Florida. Michael has a U.S. law degree (JD) from Western New England University School of Law and his master of laws degree (LLM) from Georgetown University Law Center in Washington DC.