With the change in political control in Washington, what changes are on the horizon and what estate tax planning should be done early in 2021 for those high net worth individuals who have not used all of their available exemption? The 2017 TCJA doubled the amount of the federal gift and estate tax exemption. For 2021 the exemption is $11.7 million per taxpayer. Absent any sooner change, the 2017 law will “sunset” at the end of 2025 and the exemption will revert back to the pre-2017 level of $5 million (adjusted annually for inflation).
Currently, although the Biden administration tax proposal includes a reduction in the estate tax exemption, it has not prioritized any tax law changes that would reduce the exemption to the pre-2017 level, or even a lower number. Such targeted legislation affecting income and estate and gift tax rates could be passed later this year, at the earliest, and is unlikely to be made retroactive to Jan. 1, 2021. As of this writing, the legislative focus is on a pandemic relief package and other pressing economic issues.
