Plan Now and Save: Estate & Gift Tax Breaks May Lower by Year End

Year end is a critical time for estate planning and gifting as high estate and gift tax exemption levels will likely lower as early as January 1, 2022. Your estate and gift tax advisor can help you plan for these changes, and Gordon Brothers can provide the required professional appraisal.

Since the Revenue Act of 1916 and the origins of modern estate and gift tax, the estate dollar value excluded or exempted from estate taxes has increased over time and doubled in 2018 as part of the 2017 Tax Cuts and Jobs Act. Conversely, the rate at which amounts above the exclusion were taxed have decreased over time. As recently as 2001, the amount of an individual’s estate exempt from taxation was only $675,000. Amounts above that were taxed at a rate of 55%¹. Today, the unified gift and estate tax exemption is $11.7 million per individual, and $23.4 million per couple, with a top federal statutory estate tax rate of 40%².

Although the individual estate tax exemption will be reduced to approximately $6 million by January 1, 2026, as outlined in the existing legislation, now, under the current proposals, this reduction will likely happen much sooner. Legislative proposals currently under consideration could cut the individual estate and gift tax exemption to about $6 million per individual, and $12 million per couple, adjusted for inflation, as early as January 1, 2022.

For individuals with estates valued over $6 million and couples over $12 million, it’s a good time to consider estate planning and gifting. To record gifts and put other tax strategies in place, you will need certain assets appraised. Gordon Brothers’ valuation experts appraise fractional equity interests across entities ranging from small private companies to large public companies, partnerships, real estate holding companies and joint ventures. For certain assets, such as fractional equity interests, Gordon Brothers applies appropriate discounts that can further reduce the appraised value, reducing the amount of a taxable gift.

Additionally, pandemic-driven financial volatility has increased discounts applicable to entity minority equity positions. The combination of these higher discounts, potentially lower pandemic-driven asset values and the historically high federal gift and estate tax exemptions makes this a critical time to manage your estate.

Your estate and gift tax advisor can help you plan for these changes, and Gordon Brothers can provide the required professional appraisal. Gordon Brothers’ experts value all asset classes including business interests, intangible assets, inventories and machinery and equipment, bringing decades of tax-related valuation experience to each engagement.

¹https://www.thebalance.com/exemption-from-federal-estate-taxes-3505630
²https://smartasset.com/taxes/all-about-the-estate-tax