The State of The Estate TaxShare this post
The State of The Estate Tax
2021 was aflutter with drama about the future of the estate and gift tax. Yet despite all the proposals that floated through both chambers of Congress, the estate tax is ending the year right where we started -the only change is to account for inflation.
Why was there such hoopla you may be wondering? Perhaps you’re curious as to what we mean by the term “estate tax.” The estate tax, also known as the “death tax,” is a tax imposed on an individual’s assets after the individual dies.
The Illinois estate tax rate is graduated and goes up to 16%. However, it is only applied on estates worth more than $4 million.
Starting January 1, 2022, the annual estate tax exemption amount will be $12.06 million per individual and $24.12 million for a married couple (Rev. Proc. 2021-45). The annual gift tax exclusion amount also increased after almost four years. You can now give assets or money to someone without reporting it to the Internal Revenue Service, as long as the amount is under $16,000 per person, per year.
During the fall of 2021, a couple of proposals were floating in Congress that would have lowered the estate tax exemption so that the federal government could apply the estate tax to more individuals with less wealth. These proposals are still pending and are not currently included in the Build Back Better Plan, the most recent government spending package that just passed the House. While the Build Back Better Plan goes through the Senate process for passage, we will have to wait and see if there are any added provisions pertaining to the estate tax exemption. If there are, the bill will go back to the House for another vote, and we will be back where we started.
The moral of the story: don’t wait to make any changes to your estate plan, especially in high net worth planning. The estate tax exemption is set to lower drastically beginning in 2026 and will revert to $5 million per person (as in 2010), indexed for inflation. There is not much time left to start the planning process to move assets out of your estate. There are many options to consider in order to reduce your estate tax exposure while you are alive. At Anthony J. Madonia & Associates, our team of professionals are here to assist you via phone (312) 578-9300 or email firstname.lastname@example.org.