While we are all experiencing the uneasiness of having so many plans up in the air, from family vacations to returning to the office, Lane Powell’s Private Client Services Team would like to remind you of some important planning that you can accomplish right now to utilize the historically high federal gift and generation-skipping transfer tax exclusion amount.
The Tax Cuts and Jobs Act (the “TCJ Act”) became effective January 1, 2018.
Absent further Congressional action, the exemption amounts will revert to $5 million per person, indexed for inflation, on January 1, 2026. However, in light of the unprecedented federal spending to address COVID-19, depending on the upcoming election and actions by Congress, it is possible that these exemption amounts could be reduced by legislative action prior to 2026.
If a taxpayer uses the higher exclusion amount prior to any changes in the law, then the IRS will respect the use of the exclusion amount. Under current law, if the exemption amount is reduced by Congress, any unused exemption amounts will be lost. Given that neither Washington nor Oregon has a gift tax, gifting provides a significant planning opportunity for Washington and Oregon residents to transfer assets during their lifetimes.
Taxpayers have several options for using their gift exemption.
Appraisals will be required for all assets except cash and publicly traded securities. Gift tax returns must be filed to report all gifts that exceed the annual exclusion of $15,000 per recipient.
Every taxpayer’s situation is different and there is no one-size-fits-all approach to estate and gift planning. We are happy to consult with clients to determine what strategy might work best for their specific objectives, family, and financial situation.
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