WITH POTENTIAL CHANGES TO THE IRS’ ESTATE AND GIFT TAX CODE COMING NEXT YEAR, NEW YORKERS SHOULD PLAN THEIR HOLIDAY GIFTS ACCORDINGLY
BY ANNAMARIE G. GENTILE, ESQ.
As New Yorkers welcome the joys of the holiday season, from ice rinks to festive music, our to-do lists typically consist of shopping, decorating trees and window displays, and deciding what to serve at family feasts. But for many, there’s another item that will make the list this year learning how to minimize the effects of the Internal Revenue Code’s impending changes that will impact estate and gift taxes. As of press time, the legislature is still negotiating these changes.
Estate planning strategies include taking advantage of the present $11.7 million exemption from federal gift and estate taxes. This allows wealth to be passed from one generation to the next without estate or gift tax consequences. Under the new rules being proposed in Washington, this exemption is slated to be rolled back to $6.2 million as of this coming January 1. Should this become the law, families may want to consider giving extra generous holiday gifts this year, utilizing as much of the difference by December 31 to take advantage of the existing gift tax exemption. As of January 1, 2022, whether gifted or left to remain in a person’s estate, this $5.5 million difference will potentially be subject to taxation.
There are also several proposed changes to the existing grantor trust rules, which currently offer favorable estate planning by gifting assets from the grantor’s estate to a spouse, children, or other relatives. Because the grantor retains income tax liability on the gifted assets during his or her life, the assets are allowed to grow at a maximized rate. The proposed changes will result in inclusion of these transferred estates in the descendant’s estate. If you’ve been considering creating a grantor trust, including an Irrevocable Life Insurance Trust (ILIT), a Qualified Personal Residence Trust (QPRT), or Grantor Retained Annuity Trust (GRAT), you should consider doing so before the New Year, and funding them to the greatest extent possible now. Those with existing grantor trusts should consider gifting more to them before January 1. This year, in addition to your annual holiday traditions, be sure to have your estate plan reviewed by an experienced estate planning attorney to ensure you have done all that is possible to preserve your assets for your loved ones before the ball drops in Times Square.
Angiuli & Gentile, LLP, Attorneys at Law
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