Most of us have been able to all but ignore Estate Taxes after the 2017 tax cuts almost doubled the estate and gift tax credit from $5.6 million to $11.18 million. That increase in the amount of the credit will “sunset” at the end of 2025 with the difference in the amount of credit being lost. The credit is expected to return to approximately $7 million.
For those that have organized their estate and affairs based upon the current larger unified credit amount, there is less than two years to make what can be major adjustments to an estate plan. Certainly, many will look at making use of certain tools to “lock in” the use of the expanded current gift tax amount even though there may be some disadvantages such as the loss of “stepped up” basis, which would be lost using the gift tax portion of the credit.
There have been some changes in the Florida law that may help in planning. Under the prior law, the donor spouse couldn’t benefit from a Spousal Lifetime Access Trust (SLAT) without being subject to creditors claims of the donor, thus causing the inclusion of the amount in the trust in the donor’s estate. In 2022, Florida law was changed to allow the donor spouse to be a beneficiary of the SLAT upon the death of the donee spouse under certain conditions such as no prearrangement with the donor spouse as to how the assets would be distributed after the death of the donor spouse, making it a possible tool for use in updated planning.
Given the current estate tax rate, those with estates above what is expected to be a unified credit of approximately $7 million dollars would see a significant increase in their estate tax. As it generally takes a period of time to change a plan and to implement it, the end of next year seems nearly here.
One caveat; there was a discussion a couple of years ago about significantly lowering the unified credit amount, but the change never came about. Although the current rate is scheduled to “sunset” at the end of 2025, there is no guarantee that Congress will not come up with something to save all or part of the difference in the credit. However, with the amount in additional tax in question, it seems to make it a substantial “gamble” to wait and see without at least beginning to look into it.
[email protected]
A LARGE PART OF THE ESTATE AND GIFT TAX CREDIT IS ABOUT TO EXPIRE IN LESS THAN TWO YEARS…..NOW WHAT…..MAYBE A SLATA
April 17, 2024 by ·