The 2021 Federal Estate and Gift Tax Exemption:
For 2021, the federal estate and gift tax exemption amount has been increased from $11.58 Million per individual to $11.7 million per individual and the federal generation-skipping transfer tax exemption amount has also been increased to $11.7 million per individual. Under current law, if no action is taken by Congress, on January 1, 2026 the federal estate and gift tax exemption amounts and the federal generation-skipping transfer tax exemption amount will revert to $5 Million per individual (as adjusted for inflation).
The 2021 Federal Annual Gift Exclusion:
For 2021, the federal annual gift exclusion will remain at $15,000 per individual. In addition to the exemptions described above, the federal annual gift exclusion permits each individual (a donor) to make a gift to another individual (a donee) in an amount not in excess of a specified amount (the federal annual exclusion amount) without gift tax liability and without using any portion of the donor’s federal estate and gift exemption amount. Unlike the federal estate and gift tax exemption, the federal annual exclusion amount is applied on a per donee basis so that a donor is permitted to make a gift of up to the current federal annual exclusion amount (for 2021, $15,000) to any number of donees without incurring federal gift tax liability. For example, in 2021, mom may gift up to $15,000 to each of her 10 children (for a total of $150,000) without utilizing mom’s federal estate or gift tax exemption. Further, a married couple may “split” a gift and by doing so be permitted to make a gift of up to the current federal annual exclusion amount times 2 ($30,000) to any number of donees without incurring federal gift tax liability. For example, in 2021, mom and dad may gift up to $30,000 to each of their 10 children (for a total of $300,000) without utilizing either of their federal estate or gift tax exemptions.
For more information, contact the Estate Planning, Probate & Trusts or the Tax Planning & Controversy practice groups to schedule a time to discuss your estate plan to take advantage of current tax law while the exemption remains at an all-time high and before it reverts back at the end of 2025 or is decreased even earlier.
Frank L. Leffingwell is a tax attorney in the firm’s Tax Planning & Controversy, Estate Planning, Probate & Trusts, and Real Estate sections.