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Estate Planning: Why Now?

Doug Mueller

September 09, 2020

If there is one thing taxpayers seem to procrastinate with, it’s estate planning!

Most people won’t pay estate tax under current law, with an estate tax exemption of $11,580,000 for each spouse.  This large lifetime exemption was set into law with inflation increases through the end of 2025, but the current law also “sunsets” effective January 1, 2026 – which will cut the exemption in half per spouse. The IRS has said it won’t claw back the excess exemption when the law changes to a smaller amount, so it’s ‘use it or lose it’ for this higher exemption amount. 

While the current laws have a timeline, a new administration can change or make modifications to the laws.  Democratic presidential candidate Joseph Biden’s plan is to reduce the estate exemption to $3,500,000 and eliminate the step up in basis on death as well. Considering the election uncertainty, families may want to look at their estate planning NOW!  Waiting until after the election may not provide enough time for you and your advisors to craft your unique plan.

Although the election outcome is uncertain at this time, the current laws are not. You may want to consider other concerns such as “discounts” for most minority interests, and non-voting interests of businesses when gifted to their families; which are currently still good planning options but have been attacked under previous administration.

If your estate is over $7 million (married couple), you may want to talk with your CPA or estate planner about gifts, defective trusts, charitable avenues sooner than later. It’s never too early to save money for your family and charity, and waiting until 2025 might just be too late!

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