Your Family and Taxes

This blog post is from Jessica Sherwood, Regent Law 3L and FA 2020 Wills, Trusts, & Estates student:

 

My biggest takeaway from Professor Kohm’s Wills, Trusts, and Estates course this past semester, was one overarching theme that shed light on all of our topics. One phrase we mentioned in every single class because these three words hold significant weight to wealth transfer. And the three words are…*drumroll please*... freedom of disposition. Who knew three words could hold so much power?  They hold a great deal of power for you and your family.

The freedom of disposition represents a testator’s constitutional right to transmit property as she or he wishes. An important aspect of the freedom of disposition is a testator’s decision on when and how to transfer her or his wealth. 

The ability to give generously especially during the holiday season is an incredible gift in and of itself, but also one that can come with a not so welcome gift - TAXES. Although taxes are a necessary and unavoidable part of wealth transfer, they can have their breaks if you stay in the know with current regulations. 

So what’s on the market for gift taxes in the year 2021? 

Projected President-Elect Joe Biden has announced plans to undo some of the tax regulations introduced by the Trump Administration in the Tax Cuts and Job Acts of 2017. Although this is not a guarantee until approved by Congress, it’s important to be prepared. 

Taxpayers with high incomes will see both an increase in their individual taxes and the gifts and estate tax exemptions returning to $3.5 million ($10 million per couple) as opposed to the current exemption rate of $11.5 million ($23 million per couple). We’re talking a difference of 13 million PER COUPLE! Thus, in the spirit of generosity and of savvy financing, firms are recommending moving assets to trust sooner rather than later aka before the end of 2020. 

The static news on the wealth transfer front? The annual gift exclusion amount remains the same at $15,000. “It’s remarkable how many people think about more advanced estate planning and don’t maximize the $15,000 gifts to kids, kid’s spouses, grandchildren. You remind them, ‘What about your grandchildren’s spouses?’ ‘Oh, I can do that?’” says Chris Zander, president of Evercore Wealth Management in New York City. If you’re married, you and your partner can each make $15,000 gifts, doubling the impact. 

Give generously this Christmas season and exercise your freedom of disposition by taking advantage of the opportunity to transfer assets and minimize your losses, especially as you protect and provide for your family.