If you are wondering what to get the high net worth person who has everything, you should get them into a great Trust & Estate attorney right away to get some estate planning done before 2020 comes to a conclusion. As a valuation firm, we are seeing almost a historic volume of valuations requested as smart high net worth individuals lock in planning under current tax law.

In 2020 the most prominent topics for planning have been the Tax Cuts and Jobs Act (the “TCJA”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES ACT”). The 2018 and 2019 Year-End Estate Planning Advisories noted that the TCJA created a deduction for pass-through income and eliminated many itemized deductions. Perhaps the most meaningful item from the TCJA temporarily doubled the estate, gift, and generation-skipping transfer tax exemptions. Per a recent article from The National Law Review:

While the permanency of the TCJA’s provisions still remains uncertain, the current environment provides a great deal of opportunity for new planning. We are encouraging clients to build flexibility into their estate plans and to use this window of opportunity, where appropriate, to engage in planning to take advantage of the increased estate, gift, and GST tax exemptions.

The following are some key income and transfer tax exemption and rate changes under the TCJA, including inflation-adjusted amounts for 2020 and 2021:

Federal Estate, GST, and Gift Tax Rates

For 2020, the estate, gift, and GST applicable exclusion amounts are $11.58 million. The maximum rate for estate, gift, and GST taxes is 40 percent. For 2021, the estate, gift, and GST applicable exclusion amounts will be $11.7 million. Absent any change by Congress, the maximum rate for estate, gift, and GST taxes will remain at 40 percent.

Annual Gift Tax Exemption

Each year individuals are entitled to make gifts using the “Annual Exclusion Amount” without incurring gift tax or using any of their lifetime applicable exclusion amount against estate and gift tax. The Annual Exclusion Amount is $15,000 per donee in 2020. Thus, this year a married couple together can gift $30,000 to each donee without gift tax consequences. In 2021, the annual exclusion for gifts will remain at $15,000. The limitation on tax-free annual gifts made to noncitizen spouses will increase from $157,000 in 2020 to $159,000 in 2021.

The article from The National Law Review (available here: https://www.natlawreview.com/article/2020-year-end-estate-planning-advisory) provides a lot of additional great information to consider for estate planning. The net result is that many wise high net worth individuals are doing meaningful planning that is leading to a significant uptick in needed LLC and business valuation work. As firms like ours get extremely busy with this work, for anyone looking to conclude planning in 2020 it would behoove them to see their Trust & Estate planning attorney right away to get planning in process with enough lead time for valuation and other needed logistics to be completed prior to year-end.