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    Estate & Probate » Blog » Making the Most of Federal Estate and Gift Exemptions

    Making the Most of Federal Estate and Gift Exemptions

    As of January 2021, a person in the United States is permitted to pass on $11.7 million and a married couple can distribute $23.4 million without being subject to any estate or gift taxes. A sunset clause written into the Tax Cuts and Jobs Act of 2017 as well as the results of the 2020 elections, however, place this amount in danger of being substantially reduced. 

    If financial circumstances justify utilizing this exemption, you should consider taking these actions now so you do not end up facing substantial estate taxes on your assets in the future.

    The Risk that These Exemptions Will Disappear

    These current exemptions are in danger of going away both due to exiting tax law as well as the aftermath of the 2020 elections. Not only is it critical for those impacted by these exemptions to understand they will go away, but it is also necessary to perform adequate estate planning. The Tax Cuts and Jobs Act which was passed in the final days of 2017 increased the exemption from $5 to $10 million. 

    The Act contains a sunset provision, as well. Provided that no actions are taken to extend the length of or keep this exemption, the exemption amount will be lowered to $5 million again in 2026. Additionally, due to the change in political administrations that occurred as a result of the 2020 legislation, the current legislatures have expressed the intent to accelerate this reduction as soon as the end of 2020. 

    Making the Most of These Exemptions

    While it is a near certainty that the estate and gift tax will soon lower to a less attractive amount, an opportunity currently exists. Even though a possibility exists that an estate and gift tax could be retroactive to January 1, 2021, the best way to make the most of these exemptions is to act now in regards to estate planning and estate transfers. 

    Various estate planning strategies are available to utilize these current exemptions through gifts as well as to create at least indirect access to gifted assets. One of the most common estate planning methods is that a person could utilize a spousal lifetime access trust, which is designed to benefit the grantor’s spouse for life and then the couple’s children without being subject to estate tax. A spousal lifetime access trust involves a gift from one spouse (the donor) to an irrevocable trust for the other spouse’s benefit. While these trusts are similar to bypass trusts, spousal lifetime access trusts are funded by gifts while both spouses are still alive. 

    Remember, by creating the appropriate estate planning strategy to pass on your assets now, you can greatly reduce your chances of facing significant estate taxes at any time in the future. 

    Speak With an Experienced Estate Planning Attorney

    The estate planning process is full of challenges, but a knowledgeable lawyer can help make sure that you navigate this process successfully. During a free case evaluation, attorney Jim A Lyon can review your available options to achieve your end of life goals. Contact attorney Lyon today for assistance.

    Ethan Moran
    Ethan Moran
    09:36 28 Dec 22
    To my wife and I, our probate case was complicated. Not to Jim! He made it look so easy, and his attention to detail is incredible. Highly recommend to anyone seeking an estate planning lawyer.
    Philippe Joshua
    Philippe Joshua
    17:56 30 Nov 22
    Jim's firm was referred to me by a friend who knew I was looking for an estate planning lawyer. I can't say enough good stuff about him. He's genuine, thorough and highly skilled. Strongly recommend.
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    Estate & Probate » Blog » Making the Most of Federal Estate and Gift Exemptions