Each year, towards the end of the year, the Government announces the Estate
Tax Exemption for the following year along with the corresponding Gift
Tax Exemption. The Estate Tax Exemption is the sum of assets an individual
can pass away with in each respective year without incurring any Federal
Estate Tax on the transfer of such assets. The Gift Tax Exemption is the
threshold for the sum of assets that an individual can distribute to another
without having such transfer count against their life time gifting.
In the year 2020, the Estate Tax Exemption has increased to $11.58 million,
which is an increase of about two-hundred thousand ($200,000.00) dollars
($11.4 million for the year 2019). The Gift Tax Exemption has remained
the same. Specifically, the Gift Tax Exemption in 2019 was fifteen-thousand
($15,000.00) dollars and in 2020, the exemption remains at fifteen-thousand
Below are a few scenarios to help explain how the above Gift and Estate
Tax Exemptions works.
For Example, Karen is a single woman with five (5) children and the value
of Karen’s Gross Estate is $11.51 Million.
Scenario 1: If Karen passes away in 2019, gifting her entire $11.51 Million
equally to her five (5) children, then Karen’s Estate would need
to pay up to a forty (40%) percent tax to the Government on anything over
Scenario 2: If Karen passes away in 2019, but before she died, Karen made
five (5) gifts of fifteen-thousand ($15,000.00) dollars (one (1) to each
of her five (5) children) for the last 5 years, then Karen’s Estate
is spared of the above mentioned forty (40%) percent tax because such
gifts reduced her Gross Estate to under $11.4 Million (which would pass
tax free using the Estate Tax Exemption for 2019).
Scenario 3: If Karen passes away in 2020, then she may pass her entire
$11.51 Million equally to her five (5) children without incurring any
tax. These examples show how timing and advanced planning is extremely
important in situations where an individual’s assets are at jeopardy
of being taxed upon their death.
Contact The Presser Law Firm, P.A. for a complimentary consultation to
learn more about Asset Protection, Business Law, Estate Planning, and/or
any other legal needs that you may have.
The Presser Law Firm, P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(561) 953-1050 or e-mail Info@AssetProtectionAttorneys.com