Financial advisors with wealthy clients are likely fielding big questions about the potential extension of the 2017 tax overhaul.
The consensus among policy watchers is that Donald Trump’s victory in the U.S. presidential election, combined with the Republican Party's control of the Senate and House of Representatives, makes it likely that key parts of the legislation will be extended before the law sunsets at the end of 2025.
This includes the historically high estate tax exemption, which stands just shy of $14 million per individual in 2025.
But as a trio of attorneys explored the topic during a presentation Wednesday at the Heckerling Institute on Estate Planning conference in Orlando, Florida, relatively few clients have the necessary wealth to take full advantage of the estate tax exemption.
For many clients, the more relevant planning opportunity to consider in any given year is annual exclusion gifting — and there’s a lot more to consider than the $19,000 per-beneficiary annual limit on tax-exempt gifts.
Given that they can be made each year, these gifts can add up to significant amounts over time, with no tax consequences. But clients must also beware: If more than the annual exclusion amount goes to a single beneficiary in a given year, the excess will be subtracted from the donor's applicable estate tax exclusion amount. That reduces the threshold at which the donor will owe estate taxes.
Thus, using the gift exclusion each year is an important strategy to consider, but donors must be mindful to follow the rules.
See the accompanying slideshow for seven important insights about efficient and compliant tax-exempt gifting in 2025.
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