Planning for Change: 2020 Estate & Gift Tax Opportunities

By Leslie Heffernen, JD, LLM (Tax), CPA - Managing Director of Fiduciary & Legal Services


This November, Americans will head to the polls to elect a president, senators, and representatives. As wealth advisors, we remain agnostic to the outcome, however, this election brings the possibility of changes to estate and tax regulations. Since proper estate planning takes time and changes to the law could come as early as 2021, we encourage you to speak with your relationship manager soon. Together, you can consider your options and plan ahead.


Change Is on the Horizon

Under current law, individuals can give away $11.58 million either during your life or at your death, without triggering the estate or gift tax. The amount is doubled for married couples. Gifts above this amount are subject to a 40% tax. However, after December 31, 2025, the current exemption “sunsets” and the exemption amount falls to $5 million adjusted for inflation or an estimated $6-$7 million. Other factors such as the upcoming election and higher government spending during the pandemic may prompt additional changes to the exemption amount and may raise gift and estate tax rates.


There’s Still Time to Take Advantage of Current Estate and Gift Tax Laws

Consider taking advantage of the higher exemption amount while it is still available. You may want to create a trust or make outright gifts that move assets and appreciation out of your taxable estate. A trust that is set up now can be funded later in the year – up until the December 31st deadline.


Why Is Gifting in 2020 Important?

If next year does bring new or revised tax laws, those changes may be retroactive to the date when the bill is introduced in Congress, rather than the date when the law is eventually passed. By the time the law is finalized, it may be too late for you to react. If your trust was not created and funded in 2020, you may lose the opportunity to take advantage of more favorable laws currently in place.


Other Considerations

Discussions of possible legislation changes include eliminating the step-up in cost basis rule, taxing unrealized capital gains, and eliminating certain estate planning techniques such as grantor trusts and valuation discounts.

Married couples may want to consider how to strategically employ the gift exemption between the spouses in order to minimize the impact of changes to the law. For example, deciding whether one or both spouses should make a 2020 gift or if they should elect to split their gift. One advantage of gift splitting is that you don’t have to make an election until the 2021 gift tax return due date, plus extensions.


Take Action Now

Although possible tax law changes should not drive your estate and gift planning, it is always sensible to consider them in your decision making. With potential changes on the horizon, remember that thoughtful planning and drafting take time. The sooner you touch base with your relationship manager, the sooner you can begin to take action. With prudent planning, your estate and gift tax savings could be meaningful.       


Contributions from Matthew R. Hilbert, CPA, Director of Tax, and  Mark T. Robinson, CFP®, CTFA, Managing Director





About Pitcairn

Pitcairn is a true family office and leader in helping families navigate the challenges and opportunities created by the interplay of family and financial dynamics. Through Wealth Momentum®, an experience-based family office model, Pitcairn helps families achieve a more effective and complete experience. Since its inception, Pitcairn has partnered with some of the world’s wealthiest families to meet their needs and drive better outcomes – year to year, decade to decade, generation to generation. Today, Pitcairn is recognized as an innovator, guiding families through generational transitions and redefining the industry standard for family offices. The firm is located in Philadelphia, with offices in New York and Washington, DC and a network of resources around the world.