IRS Increases Estate and Gift Tax Exclusion for 2021: What That Means for Your Estate Plan

The Internal Revenue Service (“IRS”) has announced the 2021 Federal estate and gift tax exclusion amount. For calendar year 2021, the exclusion amount is $11.7 million per individual, increased from the 2020 exclusion amount of $11.58 million. A married couple, through proper estate planning techniques or the use of portability, will have a combined $23.4 million exclusion.

The annual gift tax exclusion amount will remain at $15,000 per taxpayer per beneficiary. The Federal estate and gift tax rate will remain at a rate of 40%.

Notwithstanding these regulations, all good things may come to an end. The advent of the Biden administration could signal a decrease in the current estate and gift tax exclusion amounts. It is anticipated that President-elect Biden will push for tax reform resulting in a decrease in the Federal estate and gift tax exclusion to $3.5 million per individual, and an increased 45% estate tax rate.

In 2019, the IRS and Treasury Department promulgated IR-2019-189, which prevents the clawback of any lifetime gift made after December 31, 2017, and before January 1, 2026, when the exclusion is decreased, or possibly sooner under the Biden administration’s plan. Thus, individuals who take advantage of the current increased exclusion amount will not be adversely impacted if the exclusion later decreases.

Considering the looming possibility of a change in tax law, individuals should revisit their estate plans and consider lifetime gifting strategies to take advantage of the current increased exclusion.

If you would like to discuss the above options and changes in further detail, or you would simply like to review your estate plan in light of the anticipated changes in estate and gift tax laws, please reach out to Leech Tishman’s Estates & Trusts Practice Group.

Alexander J. Gase is an attorney in the firm’s Estates & Trusts, Taxation, and Corporate Practice Groups and practices in the Pittsburgh, PA office. He can be reached at 412.261.1600 or agase@leechtishman.com.

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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, cannabis, construction, corporate, data privacy & cybersecurity, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Philadelphia, Sarasota and Wilmington, DE.