How Much Should You Gift?

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How Much Should You Gift?

It is always a good time to review your estate plan, but now is an especially good time since we are:

  1. Living in a global pandemic
  2. Under a new Biden admistration 

We know this topic is one that is quickly pushed to the back burner because people do not like to talk about their own mortality and these scary "what-if" scenarios.

However, we encourage everyone to periodically review their estate plan because tax law significantly changes over time. And because the tax law changes, your estate plan will require changes, as well. 

Here are some quick tax updates that could impact you:

Federal Estate Tax: Individuals can have a net worth of $11.7 million before paying any federal estate tax (for context this limit with $675,000 in 2000). This doubles to $23.4 million for a married couple. However, anything over this amount is hit with a 40% flat tax.

  • UPDATE: Biden has proposed restoring estate taxes to their 2009 level: $3.5 million per person for the estate tax and a top rate of 45%.

Federal Gift Tax: This basically follows the same rules as the Federal Estate Tax. See above.

In addition, individuals can gift up to $15,000/year (couples $30,000/year) without counting against the $11.7 million exemption ($23.4 million for couples).

  • UPDATE: Biden has proposed restoring gift taxes to their 2009 level, as well: $1 million for the gift tax and a top rate of 45%.

Rhode Island Estate Tax: The estate tax exemption is up to $1.60 million with a top rate of 16%. Rhode Island has no gift tax.

Massachusetts Estate Tax: The estate tax exemption is up to $1 million with a top rate of 16%. Massachusetts has no gift tax.

If you are affected by these proposed limits, you may want to take advantage of gifting sooner rather than later. For a limited time you have an opportunity to transfer significant assets to family members and loved ones free of federal taxes.

  • UPDATE: Now that Biden has won, you may want to use as much of your exemption in 2021 in case these laws are amended.

Ultimately, the key point is that even though there is a lot of uncertainty around tax law, it is always a good idea to meet with your financial planner and estate attorney to make sure you are as protected as possible.

If you have any questions on how this impacts you, please just let us know - this is something we always review in our financial planning meeting!


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