It is that time of year again.
No, not the time we all start thinking about our January workout schedule (my
mother’s banana bread is worth every step on that treadmill). It is the time
when the IRS releases the amount you can pass estate tax free upon your death
(the Unified Credit Against Estate Tax) and the amount you can pass to any
person gift tax free (Annual Exclusion).
As we sit around with our loved
ones this holiday season, many of us will wonder what will happen to our
family, our business, or our farm when we pass away. How much will they
have to pay in taxes to keep the doors open? Will they have to sell land to pay
the estate tax? How much can I gift my children next year without paying Uncle
Sam his share?
How is the estate tax calculated? The IRS sets an amount every year that you may pass estate tax free upon your death. Whatever that amount is the year you die is the amount you may pass to your loved ones without paying Uncle Sam. Imagine everything you own fitting in one bucket, what is the value of that bucket? If the value of your bucket exceeds the amount you are allowed to pass estate tax free, then your estate will incur a 40% federal estate tax on the amount that is spilling over. Further, if you tried to give some assets in your bucket away during life and those assets exceeding the amount you were allowed to gift, the IRS will shrink your bucket resulting in a higher tax.
DID THE IRS
MAKE THE NAUGHTY OR NICE LIST?
Santa kept the IRS on the NICE
list this year.
2020 Exemptions
Estate Tax = $11,580,000
Gift Tax = $15,000
Although the IRS made the Nice
list this year, the elves have already started mining coal for 2025 when the
exemptions are set to be cut in half.
What does that mean for this
year? Eat your holiday cookies, enjoy the time with your loved ones, and feel
confident and secure that your Harris Law & Co. estate plan will pass on
your legacy and protect your family (just maybe not your taste in holiday
cookies). If you do not have a will or trust or need to review one you put
together ages ago, give us a call at 605-777-1772 for a free initial meeting (I
may even have some of my mother’s prized banana bread). Happy Holidays!
