Jun 18, 2020
This week I’m talking about the 2020 gift tax rules, and how you can take advantage of lifetime gift strategies while these options are still on the table.
Gifting, especially during your lifetime, can be a powerful strategy to transfer wealth, business interests, property, and a variety of other assets to your family and heirs, and with the current generous gifting and estate tax rules, now is the time to gift.
So far this week, I’ve talked about the gift tax rules - both the annual amount and the lifetime amount you can gift to your heirs, free from estate tax.
But I find that a lot of people struggle to understand why gifting matters in the first place and why they wouldn’t just wait until they die and let their assets pass to their heirs then.
The way the laws are currently written, when you die, a certain $ amount of your assets will pass to your heirs without being taxed. Currently that amount is pretty high - $11.58 million or $23.16 million if you’re married.
My guess is that most of you listening have estates that will be much smaller than this when you die, so you might be thinking “well, that doesn’t apply to me”. I beg to differ. Because tax rules change. And the estate tax rules are about as generous as they’ve ever been.
Back in 2000, the estate tax exemption was only $675,000 and as much as 55% of your estate above $3 million, would have disappeared to the federal government in the form of taxes.
Estate and gift taxes are as generous as they have ever been and it’s unlikely to last, since estate taxes are a powerful way for Congress to raise revenue to fund their ballooning debt load, so you can bet that estate and gift taxes will change and will likely drop - maybe substantially so by the time you kick the bucket.
If history is any guide, you can expect a much lower estate value will be subject to tax in the future and that tax rates on your estate could be as high as 50, 60, or even 70%.
So the clock is ticking, and now is the time to gift.
That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.
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