2020 Estate and Gift Tax Update

On November 6, the IRS announced the official estate and gift exclusion amounts for 2020 in Revenue Procedure 2019-44.

For an estate of any decedent dying during calendar year 2020, the applicable exclusion is increased from $11.4 million to $11.58 million.  This change increases not only the applicable exclusion amount available at death, but also a taxpayer’s lifetime gift applicable exclusion amount and generation-skipping transfer exclusion amount.  This means a husband and wife with proper planning could transfer $23.16 million estate, gift and GST tax free to their children and grandchildren in 2020.   If no new tax law is passed, the increased exclusion amounts are scheduled to expire on December 31, 2025, which would mean a reduction in the exclusion amounts to $5 million (adjusted for inflation).

The estate, gift and GST tax rates remain the same at 40% and the gift tax annual exclusion remains at $15,000.

The gift tax annual exclusion to a non-citizen spouse has been increased from $154,000 to $157,000.  While gifts between spouses are unlimited if the donee spouse is a United States citizen, there are restrictions when the donee spouse is not a United States citizen.

The New York exclusion amount was changed as of April 1, 2014, and does not match the federal exclusion amount.  In 2019, the New York exclusion amount is $5.74 million.  The 2020 New York exclusion amount has not yet been released.  It is important to note that, unlike the Federal exclusion amount, the New York exclusion amount is not portable, meaning if the first spouse to die fails to utilize his or her full exclusion amount, the surviving spouse will not be able to utilize the first spouse to die’s unused exclusion amount.