The “portability” rules provide for the transfer of a deceased spouse’s unused estate tax exemption (“deceased spousal unused exclusion amount” or “DSUEA”) to a surviving spouse (without inflation adjustments). Paragraph 8 on page 7 includes more information about the GST tax.ĭ. For 2021, the GST tax rate also remains at 40% and the lifetime exemption also has increased to $11,700,000 in 2021 until after 2025 (indexed for inflation).
In addition, Executors must report the basis of inherited assets as shown on the federal estate tax return to the IRS and to the beneficiary of the asset.Ĭ. Accordingly, be sure to advise your broker of your basis in securities received by gift or inheritance. In this regard, securities brokers still are required to retain basis records and report the income tax basis of securities to the IRS. All of a decedent’s assets (other than “income in respect of a decedent,” such as IRAs and retirement plan benefits), as well as a surviving spouse’s half of any community property assets, still will have an income tax basis equal to the fair market value of those assets at the date of death. The estate tax exemption (reduced by certain lifetime gifts) also increased to $11,700,000 in 2021 until after 2025 (indexed for inflation), and the tax rate on the excess value of an estate also remains at 40%. The tax rate on gifts in excess of $11,700,000 remains at 40%.ī. The cumulative lifetime exemption increased to $11,700,000 in 2021 until after 2025 (indexed for inflation). The tax-free “annual exclusion” amount increased to $15,000 in 2018 and remains the same in 2021. The 2018 Tax Act provided for an increase in the transfer tax exemption from $5,000,000 to $10,000,000 (indexed for inflation ) until after 2025. The major changes made in 2010 in the law regarding gift, estate, and generation-skipping transfer (“GST”) taxes (collectively, “transfer taxes”) are now permanent, although any new Congress could amend them. The discussion below assumes that none of the foregoing proposals is enacted.Ģ. $3,500,000 exemption no basis step-up at death or unrealized capital gains taxed at death unless property passes to spouse or charity (Canadian system, but no estate tax). 28% rate (minimum tax of 15% on financial statement income).Į. 6.2% rate on first $137,700 of wages and on wages in excess of $400,000.ĭ. Personal Social Security and Medicare Taxes. 39.6% rate on qualified dividends and capital gains for taxpayers with incomes in excess of $1,000,000 3.8% Obamacare surtax on capital gains.Ĭ. 39.6% rate for taxpayers with incomes in excess of $400,000.ī. Any tax changes enacted in 2021 could have retroactive effect, making estate planning this year much more complicated.Ī. Brief Summary of Some Biden Tax Proposals.
LONG TERM CAPITAL GAIN 2017 CALIFORNIA SERIES
President Biden has proposed a series of sweeping tax changes as outlined below.ġ. In view of the massive federal bailouts that have occurred and are likely to occur this year, it seems logical to assume that significant changes (increases) to the tax burden on many individuals will be enacted. We first discuss perhaps the most important recent development, which was the outcome of the 2020 “Blue Wave” Election that gives the Democratic Party control of the presidency and Congress. Blank Rome’s annual estate and tax planning newsletter discusses certain concepts and techniques that should be considered in 2021 by our clients and friends in California.