As Benjamin Franklin famously quipped, the only two certainties in life are death and taxes.
In recent years, the federal estate tax exemption has been adjusted annually for inflation.
It was not always so.
According to a recents Yahoo Sports article titled “Estate Tax Exemption Amount Goes Up for 2021,” when you die your estate is not subject to the federal estate taxes unless your estate value exceeds the exemption amount in effect for that year.
As I type this (check the posting date), the 2021 tax exemption amount will be adjusted upwards with inflation to $11.7 million (up from $11.58 million for 2020).
If you are married, then you can protect twice that amount.
While many Americans fear losing their estates to “death taxes,” very few of us will die with an estate subject to this dreaded tax.
The tax exemption has not always been this high.
As recently as 2018, before President Trump enacted his tax cuts, the tax exemption what roughly half of what it is today.
These tax cuts are set to expire on January 1, 2026, and reset to the Pre-Trump levels.
However, even this hangs in the balance depending on the final outcome of the recent election.
A Biden presidency threatens to drop the federal estate tax exemption amount sooner than its scheduled expiration date.
While you are at it, beware of “death taxes” closer to home.
In other words, 12 states and the District of Columbia levy their own estate taxes at a much lower threshold than the federal estate tax exemption amount.
Another six states assess an “inheritance tax” based on the degree of relationship of the inheritor to the decedent.
Yes, all of this can get very complicated.
Fortunately, neither Kansas nor Missouri has a state estate tax or an inheritance tax.
These certainly are interesting times, yes?
Reference: Yahoo Sports (Oct. 27, 2020) “Estate Tax Exemption Amount Goes Up for 2021”