At just past its midpoint, 2020 has certainly been an unpredictable year. The relentless shocks to our routines and expectations do, however, present a number of important and timely estate, gift and income tax planning opportunities. Uncertainty at a political level, and the possibility of further changes in the tax code, create urgency.

Gifting

A federal estate tax of 40% is due on taxpayer’s estates at death (if married, it is due on the death of the surviving spouse) if the estate(s) exceed the then available exemption amount. An available exemption amount is excluded from taxation, which amount can either be gifted during life or bequeathed at death with no gift or estate tax due. As between married persons, any unused portion of the available exemption amount can be carried over to a surviving spouse, or “ported,” to be added to their available exemption amount and is then later available for that person to use. For 2020, the current exemption amount is $11.58 million per person, annualized for inflation, thus increasing each year, until it drops back down in 2026. As a result, in 2026, the exemption amount will drop to $5 million, adjusted for inflation, which when indexed for inflation is expected to be approximately $5.5 million. ...