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With a Democratic majority now settled into Washington, estate planners are contemplating the potential impact on the estate and gift tax exemption previously increased by the preceding Republican administration. Whether any changes to the estate and gift tax exemption will be made in the near future remains speculative, but the possibility of retroactive legislation has estate planners on high alert. Many clients made gifts in 2020 in anticipation of the “Blue Wave,” and many more will continue to make gifts this year, taking advantage of the current $11,700,000 federal estate and gift tax exemption which is scheduled to sunset on Dec. 31, 2025, under current federal law. What happens if a client made gifts that exceed a retroactive change to the estate and gift tax exemption? With careful planning, clients may be able to take advantage of the current enhanced estate and gift tax exemption and avoid gift tax.

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