Navigating the Estate Tax Horizon
The Time Is Now
Looking for a golden opportunity? A series of articles from the Wall Street Journal suggests that one exists, but time is of the essence. There is an urgency to consider a range of estate tax strategy options in order to maximize gifting family wealth rather than family drama.
The options range from straightforward gifts to heirs, accelerated gifting, use of irrevocable trusts, and other estate freeze tactics to lock in assets at current value and transfer future appreciation to heirs without triggering additional taxes. This series provides better and more creative ways to plan and divide family assets that can avoid family squabbles over Grandpa’s signed Babe Ruth baseball or Pawpaw’s 1961 Ferrari 250 GT California Spyder.
The Estate Tax
In the realm of fiscal policy and wealth transfer, few subjects are as controversial as estate taxes. One side coins the practice a “death tax,” unfairly taxing people on their exit from the world and ascension to the pearly gates. The other sees the current estate tax regime as a crucial element of tax policy, redistributing wealth and ensuring an equitable distribution of society’s resources.
Since being enacted over 100 years ago, estate taxes have been levied at varying percentages and provided for wide-ranging exemption amounts to taxpayers.
In more recent times, the trend has moved toward larger and larger exemptions, with a significant step-up in the applicable exemptions occurring during President Obama and Trump’s respective tenures, figuring into the complicated political calculus on the issue. Figure 1 highlights the federal estate and gift tax exemption for an individual filer in more recent periods.
Sunsetting provisions are time-limited conditions that set an expiration date for a particular statute or regulation. These provisions are designed to encourage periodic review of the law’s relevance, necessity, and effectiveness.
