Estate tax exemptions–Gift up to step-up

Estate Tax Exemptions might be less appreciated without a tax avoidance strategy.

Estate tax exemptions have increased dramatically from back in the 1990s to the point where a well-heeled couple could effectively exclude $10.86 million in assets from the estate tax. That being said, the couple with less than $10 million in assets virtually have no estate tax concerns. By the year 2025, assuming 2 percent inflation, this exemption could reach $12 million.

The flip side of this coin is that income tax rates have increased to 39.6 percent, capital gains to 20 percent; and high-income earners will get hit with a 3.8 percent surtax on top of that.

With no sunset on the current estate tax law, income tax avoidance has become fine art in the world of wealth preservation. Options for beneficiaries must be designed so as to allow flexibility in the ebb and flow of income and estate tax laws. One such option is gift-wrapped, stepped-up, and less appreciated.

Here is true, fine art tax avoidance. Simply put, a son or daughter gifts appreciating assets up to a parent. Bottom line, the gift is ultimately less appreciated.

Bottom line

Want to find out more about less appreciated assets? Email or call me and we’ll make an appointment to talk about your tax planning and strategies.