They say that elections have consequences, and this is definitely true. Whether or not the consequences are to your liking will depend upon the circumstances. This dynamic is going to play itself out in the near future, because 2020 is an election year.
There could potentially be some changes in the tax structure that impact the taxes that are paid on inheritances. We will look at the details in this post.
Federal Estate Tax Exclusion
The federal estate tax looms large for very wealthy people. This tax carries a hefty 40 percent maximum rate, and this can take a significant bite out of your legacy. It is currently only a threat for high net worth families because there is a credit or exclusion.
This exclusion is the amount that can be transferred tax-free. Only the portion of an estate that exceeds it would be subject to the estate tax.
One side of the political spectrum wants to reduce taxes on the wealthy, and the other side wants to raise them. In 2018, we saw a significant increase in the federal estate tax exclusion. The exclusion was raised to $11.18 million; a $5.49 million threshold was in place the previous year. Since then, there have been annual inflation adjustments. The federal estate tax exclusion in 2020 is $11.58 million.
Given our significant federal budget deficits, some in Congress have signaled an intent to reduce the amount of the federal estate tax exclusion. This is a situation to keep an eye on if you have death tax concerns.
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We are here to help if you would like to discuss taxation or any other estate planning matter with a licensed attorney. Our Charlotte, North Carolina office can be reached at 704-944-3245 (Charlotte or Huntersville, NC). The number in Kentucky is 606-324-5516 (Ashland, KY) or 859-372-6655 (Florence, KY), and we have a contact form you can fill out if you would like to send us a message.