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Understanding Estate Tax Law - Past, Present and Future

One of the things that many of our clients have a hard time keeping up with are changes and updates to the United States’ Federal Estate and Gift tax laws. Over the years these numbers have fluctuated wildly and have had an overly large impact on the transfer of wealth from generation to generation.

Going all the way back to 2001, the Federal Estate tax exclusion was $675,000 with any amount attributable to a decedent’s Estate that exceeding this number being taxed at a minimum rate of 37% all the way up to a maximum of 60%. In 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act (“EGTRRA”) which allowed for a slow and steady increase to the Federal Estate exclusion.

From 2002 until 2009 the exclusion rate grew first to $1,000,000 per person then up to $3,500,000. Then in 2010 the Federal Estate exclusion was repealed and no exclusion level was set. George Steinbrenner, the longtime owner of the New York Yankees, died on July 13, 2010. It was reported that his estate was worth in the ballpark of $1.1 billion yet because he died in 2010 his heir did not have to pay any estate taxes. Mr. Steinbrenner’s family, through Yankee Global Enterprises, LLC – still own the Yankees. If Mr. Steinbrenner would have died in 2009 when the Estate Tax exclusion was only $3,500,000 his estate could have owned nearly $500 million in estate taxes.

We are currently in a similar Estate Tax exclusion window. Our Federal Estate exclusion is set at $12,920,000 for 2023 and $13,610,000 for 2024. At the end of 2025 these rates that were established under the 2017 Tax Cuts and Jobs Act will sunset. It is expected that the Federal Estate Tax exclusion will then fall to $5,000,000 plus inflation.

Over the next several weeks we will be providing information on how to preserve your Estate Tax exclusion, what “Portability” means in relation to the current exclusion amount, how the gift tax annual exclusion works, and lastly how to implement a SLAT to capitalize on this historically high Federal Estate Tax exclusion.

To discuss your specific situation please feel free to reach out to our offices to schedule a consultation.

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