More on Federal Estate Tax Exemptions

 Law firms are talking with clients about being prepared in case there is a reversion to the lower exclusion amounts found in the 2017 Tax Cuts and Jobs Act.

Column distributed by Hearst Connecticut Media Group.

Links to resources referenced:

• Cummings and Lockwood LLC 2024 Private Clients Annual Update
  • https://www.cl-law.com/news-events/2024-private-clients-annual-update
  • Related column excerpt:
    • “Cummings and Lockwood LLC, a law firm based in Connecticut and Florida, offered the following examples of individuals who should talk with their lawyers about possibly making gifts to reduce their estates. I’m quoting from the firm’s 2024 Private Clients Annual Update:”
    • “Clients who are certain they will never need the gifted assets and can maintain financial independence without those assets and the income they may generate.”
    • “Clients who are confident the gifted property will appreciate in value before death.”
    • “Clients who believe that federal tax exemptions will be reduced below the current level for a prolonged period.”
    • “Clients who are willing to gift the entirety of their exemption now, or at least the majority of it. Because the exemptions may be decreased later, you must give enough now to use what might be taken away.”
• Bank of America, “Could potential tax law changes have an impact on your estate?”
  • https://www.privatebank.bankofamerica.com/articles/estate-gift-tax-exemption-sunset.html
  • Related column excerpts:  
    • “When considering the type of gift, Bank of America Private Bank offered:”  
    • “The simplest strategy is a direct gift of cash, securities or other assets with a value up to the lifetime exemption. Keep in mind that you have other avenues for tax-advantaged gifting beyond that. You can, for instance, use the annual gift tax exclusion -- $18,000 in 2024, $36,000 for couples -- to make yearly gifts to as many people as you like.” See ‘Could potential tax law changes have an impact on your estate?’
• Husch Blackwell LLP Thought Leadership “Understanding the 2026 Changes to the Estate, Gift, and Generation-Skipping Tax Exemptions”
  • https://www.huschblackwell.com/newsandinsights/understanding-the-2026-changes-to-the-estate-gift-and-generation-skipping-tax-exemptions
  • Related column excerpts:
    • “Savings in taxes can be significant. Law firm Husch Blackwell LLP, in a Thought Leadership article, offered an example of the possible difference in estate taxes:”
    • “‘Imagine you have a $20,000,000 estate in 2024 and utilize the $13,610,000 exemption to its fullest. If you were to pass away in 2024, your taxable estate at death would be $6,390,000. With the estate tax rate at 40%, your estate will have a tax bill of $2,556,000. The portion of your estate passing to your loved ones would be $17,444,000.’”
    • “‘However, if you didn’t take advantage of the exemption in 2024 and waited until 2026 when the estimated exemption drops to $7,000,000, you would have a taxable estate at death of $13,000,000. By using the same 40% tax rate, your estate would have a tax bill of $5,200,000. Therefore, the portion of your estate passing to your loved ones would only be $14,800,000.’”

• Northern Trust Institute, “Are You Prepared for Sunsetting Estate Tax Exemptions?”
  • https://pages.e.northerntrust.com/wm-exemption-expiration-gate.html?utm_medium=native&utm_source=dianomi&utm_campaign=wmnational_grp-us-leadgen-insights-20240517&utm_content=dianomi_estate_tax
  • Related column excerpts:
    • “Remembering the big picture is always a good strategic approach. ‘Evaluate any proposed transfer against all of your financial goals. Is this a gift that you would make regardless of tax rules?’ suggests Northern Trust Institute’s ‘Are You Prepared for Sunsetting Estate Tax Exemptions?’”