The Season of Giving

{4 minutes to read} ‘Tis the season, as they say, for gifting. So today we’re going to focus on that task. We are in a unique time period where, under the recent tax law change that Donald Trump put in, the ability for ultra-high-net-worth and high-net-worth people to gift a large amount of money is a window that is potentially going to disappear.

With Donald Trump’s tax reform, the exemption for what you could give away was doubled from about $5 million to about $10 million per person, which indexes with inflation each year. So for 2020, you can give away $11,580,000. That is what is known as your lifetime exemption. If you are married, you would be allowed to use your $11.58 million and your spouse’s $11.58 million exemption, giving you the ability to pass $23,160,000 to your children, estate tax free. On top of that, you have $15,000 per year that you could give away in what is called your annual gift exclusion amount.

However, that tax law change was temporary. It is due to sunset on December 31, 2025 and as a result of the November 3rd election, we have a new president coming in January of 2021. That new president is probably going to make changes to the estate tax laws, moving the deadline up, so that you no longer have the ability to give away that $23,160,000 once a new tax law is signed. That makes this a “use it or lose it” scenario.

What time of the year are we in? The Holiday Season, which traditionally is the gifting time or the Season of Giving, so, our recommendation is to take advantage of this unique opportunity and lock in this very generous gift and estate tax exemption. If the new president comes in and lowers the amount you can give down to $5 million, you’ve already given away the money and so should be okay, because the IRS has said they would not claw any gifts back into your estate.

This is a huge opportunity for the many people who have the ability to make these gifts, but if you don’t use it, you might end up losing it because once the new rule goes into effect if then you want to give away $11 million and the allowed exemption is only $5 million, you’re going to be on the short end of the stick.

Right now we’re in a very good time to make these gifts. We’re recommending to all our high-net-worth clients to give away the money today if they can afford to so that they can save a tremendous amount of tax tomorrow. The federal estate tax is 40%. On top of that, depending upon what state you’re in, you may also have to pay a state inheritance or state estate tax, bringing your total tax to potentially above 50%. If you can give away $23 million versus just $11.5 million, it will save about half of that $11,500,000.

That’s a lot of money, and with a new president and Senate coming in, the time to make these gifts is now because the window may close before December 31, 2025. If you have any questions or want to discuss this, now is the time to give us a call.

With that in mind, I want to wish everybody a Happy and Healthy Holiday Season.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS. Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.
This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.American Portfolios Financial Services, Inc.(APFS) and American Portfolios Advisors, Inc.(APA) are not affiliated with any other named business entities mentioned.