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New Estate Tax Limits Highlight Need to Plan

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New estate tax limits

Every year, the IRS announces inflation-adjusted numbers for all kinds of tax-related things.  Estate and gift tax limits are among them, and the 2020 numbers are here. The new estate tax limits will be $11.58 million per person, up from $11.4 million. The same figure applies to lifetime gift tax exclusion, as well. That means if you die in 2020, you can leave a total of $11.58 million in lifetime gifts and transfers at death, and pay no federal estate or gift tax. Married people get to double that amount: $23.16 million. The annual gift exclusion will remain the same: $15,000.

What does this mean for you? If you have assets totaling more than $11.5 million, you may want to consider taking action, if you haven’t already, to take advantage of the higher exemption. If you are not in that club, you still might want to pay attention to some estate tax-related issues.

Note: Arizona has no state estate tax, and a lot in this article would change if we were in one of the 17 states or the District of Columbia that have separate estate or inheritance taxes.

$11.5 million and up (or married with $23 million)

The sky-high exemption is of course a feature of President Trump’s tax law, which doubled the federal estate tax exemption to a $10 million base. It’s not forever, though. It will automatically “sunset” to a $5 million base in 2026. The IRS has said it wouldn’t claw back lifetime gifts after the exemption is lowered. That means there may be a window of opportunity to shift assets out of taxable estates.

That window could be a small one.  Democratic Presidential hopefuls say they’ll bring the exemption down to at least its 2009 level of $3.5 million, plus boost the tax rate. Analysts say, if there are political shifts, a revamp of the estate tax is far more likely than the untested “wealth tax.”

About that $15,000 gift limit

Almost everyone has heard that you can make gifts of $15,000 tax free. What many people don’t realize is that these gifts can be made to anyone at all – not just kids and not just family members. A husband and wife can each make $15,000 gifts, doubling the impact. Over and above those amounts, you can make direct payments for medical and education expenses – unlimited. This type of gifting is not relevant to you unless your estate may be subject to estate tax.  If you exceed the exclusion amount, you simply chip away at your lifetime exemption. If you made gifts of $20,000 to your three children, you’ve used $15,000 of your $11.58 million exemption, meaning you have $11,565,000 left.

What is more likely to be relevant is the fact that $15,000 gifts are allowed ONLY for estate tax purposes. They are not allowed for Medicaid (ALTCS in Arizona). It’s a common misunderstanding.

Estate plans cater to estate tax from days gone by

Your estate plan may be designed to minimize estate tax when it no longer needs to. Not that long ago (1997), the federal estate tax exemption was only $600,000, and it crept up until a big jump to $5 million in 2010.  If your estate plan was crafted when the exemption was lower (anytime before now), it may include provisions that do not minimize tax but cost more than if you had a simpler plan. That’s because while the estate tax has faded as concern for most people, income tax has become a bigger threat.

Say your plan leaves funds in trust for your surviving spouse. It might be possible, even preferable, to simplify, at least for tax purposes. (There are other reasons for this type of structure; there is more to planning than tax avoidance.)

Similarly, if a spouse died, and the assets are held in an irrevocable trust for the survivor, that trust might result in more tax, not less. Consider a review with an attorney to see if updates might be possible.

Those caught in the middle ground

For those with estates between $3.5 million and $11.5 million, things get tricky. You may be delighted to be under the estate tax radar, but no one knows how long that might last. If you care about minimizing tax, flexibility is key – and can be achieved with the right drafting. Powers can be added and strategies employed to provide the ability to adjust in the future.

Also remember that we are Tucson, Arizona elder law attorneys, and our advice is not as reliable for people who do not live in Arizona, or own out-of-state property. Why is that important to note? Because some states still impose state estate taxes (Arizona does not) and may require additional planning.

The estate tax landscape has been shifting for some time, and more dramatic changes could be coming. The new estate tax limits may seem to exempt you from any potential estate or gift tax liability, but things do change. Know how various challenges affect your estate, and, from time to time, look around to see if something has changed.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.