Terry and I voted this week. Lots of factors to consider. For me, the main consideration was not the candidates’ personal appeal but the principles they and their party publicly uphold. Neither is perfect.
In all the conversation about the 2020 election and its impact on our lives, I’ve heard neither the presidential nor vice-presidential candidates mention federal transfer taxes, sometimes euphemistically or inaccurately called death taxes or inheritance taxes.
It can be complicated, so consult your tax advisor for specific details. Here’s a brief summary:
Federal transfer taxes include estate, gift, and generation-skipping taxes. The federal estate tax applies to the transfer of property at death. The gift tax applies to transfers made while a person is living. The generation-skipping transfer tax is an additional tax on a transfer of property that skips a generation. https://absolutetrustcounsel.com/
When my father died in 1983, the estate value one could pass to loved ones without incurring any estate tax was $275,000. That amount is called the estate tax exemption. In 1983, anything over the exempted amount was taxed at 60%! When my mother died in 2019, the exemption was $11.4 million. Neither Mom nor her children had anything to worry about in that regard.
Today that exemption amount is $11,580,000. Per person. It can be doubled for a married couple under what’s called the unified federal gift and estate tax exemption. So if a married couple plans their estate properly, their combined assets of up to $23,160,000 can be inherited by their loved ones, with no estate tax. That’s incredible! Any excess is taxed at 40%.
It’s estimated that over 99% of Americans will not be affected by estate tax. At least not if the rules stay as they are now. But as a result of the Tax Cuts and Jobs Act of 2017 (TCJA), the federal unified estate and gift tax basic exclusion amount is scheduled to sunset back to $5 million after December 31, 2025, absent future legislation. That’s still a formidable number.
Who establishes the amount of this exemption? The United States Congress, of course. It has fluctuated between a low of $40,000 (1940-‘41) and today’s high of $11.58 million. Some states also have a state estate tax and/or state inheritance tax. Texas has neither.
Here’s a news flash for you: A future Congress and President may impose greater taxes on wealth transfers by reducing the transfer tax exemption amount to a much lower level and/or by increasing the transfer tax rates on amounts in excess of the exemption.
If you haven’t already voted, among other topics, you may want to consider which presidential and congressional candidates are more likely to reduce this exemption and enact other changes in order to raise taxes for expanded federal spending. Most of us mere mortals still won’t have to worry if the $5 million amount is not changed. But it could easily drop. Precipitously.
Although it’s our privilege and responsibility to pay taxes of all kinds, Jesus wisely defined the parameters when he said, “Give to Caesar (the government) what belongs to Caesar, and give to God what belongs to God.” Matt. 22:21
We at Legacy Deo understand those words of Jesus to mean that Caesar, the government, should get no less but no more than he/it is entitled to receive. The federal government agrees, by declaring that gifts to churches and other qualified charitable organizations are exempt from income, estate, and gift taxes, as allowed by Internal Revenue Service regulations.
Working with your tax advisor, Legacy Deo can provide information and assistance for your estate planning and charitable giving consideration and implementation. Go to www.legacydeo.org.
You, your family, your favorite charities, and even our country will be blessed as a result!