2021 Federal Estate Tax Thoughts

The federal estate tax exemption is adjusted each year for inflation, and it is significant because there is a lot at stake for some families.  Especially, for those families that have not prepared their family legacy to minimize or eliminate the tax exposure.

2021 Estate Tax Exemption

What is important to know is that when you die, your estate is subject to the federal estate tax if the value of your estate is more than the federal exemption amount.  For people who pass in 2021, the exemption amount increased from $11.58 million in 2020, to $11.7 million in 2021.  That means a married couple have a combined exemption amount of $23.4 million and tax is only due if their estate is in excess of the federal exemption amount.

Estate Tax Rate

Only a small percentage of U.S. citizens die with an estate value more than $11.7 million.  However, for estates that do, the federal estate tax rate is 40% for the amount more than the exemption amount.  Yes, that is a 40% tax rate under present law.

Historical Estate Tax Exemptions

When you look at the history of the estate tax exemption you will see that it has only gone up since the federal estate tax was reformed in 1976.  In most cases, the increase is modest, such as a simple adjustment for inflation. However, at times, the exemption amount has jumped considerably.  For example, it increased from $675,000 to $1 million in 2002, from $1 million to $5 million in 2011, and from $5.49 million to $11.18 million in 2018.  Note that the 2018 increase is only temporary, and the exemption amount decreases to $5 million (adjusted for inflation) in January 2026.  Additionally, the federal estate tax exemption might very well decrease sooner than 2026 as President Biden has called for a reduction of the exemption amount.

Now What?

The good news is that whether to pay the estate tax is a choice.  One choice is to simply not plan and your estate will pay the tax, or you can plan and reduce, or completely eliminate, the estate tax all together in some cases.

If you are willing to commit to planning, we have tried and true strategies that can protect your family legacy.

Here at the Borkus Law Group we focus on pinpointing your biggest concerns and help you protect your family’s legacy.  Contact our team at Borkuslaw Group today and make a live online appointment!

Please note that information contained in this news alert is not and should not be construed as legal advice or opinion nor does this information alert create an attorney-client relationship.

About the Author: Randall Borkus

We believe that business succession, asset protection and estate planning are less about numbers and much more about helping people preserve, protect, and provide for who and what is most important to them.