Estate Planning Update
- 2021 Annual Gift Tax Exclusion: remains at $15,000 per donor, per donee.
- 2021 Gift and Estate Tax Exemption: increased to $11,700,000 per donor through 2025, see #8.
- Marital Deduction for Transfers to U.S. Spouse: unlimited.
- 2021 Generation Skipping Tax Exclusion: increased to $11,700,000 per donor through 2025, see #8.
- Top rate for Federal Estate, Gift and Generation Skipping Taxes: 40%.
- National Topics: Forget taxes, how about an international pandemic, political instability and economic uncertainty to rattle our world? The COVID-19 virus is rampant. Vaccines are being distributed, but a slower pace than we hoped. The full impact of last fall’s election on estate tax planning has yet to be felt. President Biden has indicated his intent to reduce the Federal Estate Tax and Gift Tax Emption to $3,500,000, but this may get lost in the flurry of other more significant agenda items, such as the pandemic and increased stimulus packages. More importantly, the Democratic Party took control of the Senate, so the party controls both legislative bodies. If reducing the exemption is doubtful in the short term, the change in the legislature means the currently doubling of the Federal Gift Tax Emption will likely be allowed to expire at the end of 2025.
- Arizona Topics: Legislation is being considered which would provide for asset protection trusts in Arizona. These trusts are authorized in Delaware, Nevada, Alaska and Wyoming among other states and can be used to protect assets in certain situations despite the trusts not being created by a third party. As we have noted before, the new LLC Act for existing limited liability companies became effective September 1, 2020. The new law modifies or creates statutory rights regarding information, transferee rights, causes of dissolution, derivative actions and the fiduciary duties of loyalty and care. In certain circumstances, owners of LLCs may want to modify these rights in their operating agreements. Also new ventures should incorporate these concepts into their formation documents.
- Estate Planning Opportunities: Individuals with more than $5,000,000, or couples with more than $10,000,000, who are either over the age of 80 or considering large gifts in the next ten years should consider accelerating these gifts before the exemptions are reduced, regardless of whether it is through the President’s new tax proposal or the expiring of the tax exemptions in 2025. There are many flexible tools to achieve your objectives, from simply obtaining a second to die life insurance policy to cover the additional estate taxes to more sophisticated trust planning such as a GRAT or SLAT to minimize their impact. Please call and schedule an appointment if you want to discuss how you can take advantage of these opportunities.
- Quinn News: Quinn spoke at the Arizona State Bar Convention in December on the new LLC Act’s Ramifications for Operating Agreements. The recorded seminar is available to attorneys on the State Bar’s website.