The Internal Revenue Service announced in Rev. Proc. 2020-45 that the unified credit against estate tax and generation skipping transfer tax exemption will continue to rise in 2021 based on new numbers that have been adjusted for inflation, while the annual gift exclusion will remain the same.
The annual gift exclusion for 2021 is projected to remain unchanged from 2020 at $15,000 per person. This means that you can gift to as many people as you want (i.e., children, grandchildren, and friends) without using any of your lifetime exemption as long as the total value of the gift to each beneficiary does not exceed $15,000. If you are married, each spouse has a $15,000 annual exclusion meaning a total of $30,000 could be gifted to each recipient.
The lifetime exemption amount for 2020 is currently set at $11.58 million and is projected to rise to $11.7 million in 2021. This means that for 2021 (barring any potential law changes) you can transfer, during life or upon death, $11.7 million before incurring estate or gift taxes. Similar to the annual exclusion, if you are married, each spouse can transfer $11.7 million, or $23.4 million combined, before incurring estate or gift taxes.
If you have any questions about your current estate plan or would like to make an estate plan, please do not hesitate to contact us at Schneider Downs.
