As has been well documented, the current estate and gift tax exemption of $ 11.7 million per person is expected to expire on December 31, 2025.
Unless the current exemption is made permanent due to the current political environment in Washington on or before December 31, 2025 (which is highly unlikely). As of January 1, 2026, the new federal estate and gift tax exemption is approximately $ 6 million per person. In just four years, it is likely that someone who does not act has missed the opportunity to avail of current gift tax exemptions totaling $ 5.7 million. This leads to the possibility of substantial estate taxes from the federal and state governments in the event of their death. It should be noted that in November 2019, the IRS advised taxpayers that the exclusion for calculating the gift is the amount when the gift was given, not that of 2026. So if they give life taxable gifts after 2017 and die after 2025 You will not reclaim the amount donated on or before December 31, 2025 into the federal taxable estate.
In addition to the significant benefit of gift giving resulting from the current estate and gift tax exemption, the Covid-19 pandemic has significantly reduced the value of commercial real estate (apartment buildings and retail space), particularly in New York City and other major cities. The values have fallen dramatically due to the currently forecast vacancy rates and rent defaults. As a result, many properties have lower current ratings so that one can give those properties to relatives and / or dependents’ trusts while maximizing the current amount for gift tax exemption. This benefit is further increased if one does not give a majority stake in the premises and / or the company that owns the premises, so that the seller can further reduce the value of the gifted property by using a discount for lack of marketability and a minority Interest discount. This discount further reduces the amount of gift tax exemption used by the gift.
As if the above weren’t convincing enough that there is a golden opportunity to protect assets from estate taxes, the current low interest rate environment provides an opportunity to use estate planning tools like the Grantor Retained Annuity Trust (GRAT).
There are many factors beyond the estate tax benefit that need to be considered before giving any asset. Perhaps the most important thing is whether one is comfortable giving the gift and whether the gift is to be given directly or to a trust. In the current environment, however, where there is a potential likelihood of a reduction in the inheritance tax exemption by the federal and state governments, measures to reduce the taxable estate are essential.
Anthony J. Enea is a member of Enea, Scanlan and Sirignano, LLP from White Plains, New York. His practice focuses on Elder Law, Wills, Trusts, and Estates. Mr. Enea is the past chairman of the Senior Law and Special Needs Department for the New York State Bar Association (NYSBA). He is the current chairman of Section 50+ of the NYSBA. Mr. Enea is the former President and founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Mr. Enea is President of the Westchester County Bar Foundation and a past President of the Westchester County Bar Association. He is also a Certified Elder Law Attorney accredited by the National Elder Law Foundation. Mr. Enea can be reached at (914) 948-1500 or at email@example.com