Estate Tax Exemption Changes Are Coming: Are You Prepared?

Estate Tax Exemption Changes Are Coming: Are You Prepared?


Business owners should be closely watching the news about estate tax exemptions. For 2021, the exemption is $11.7, or $23.4 million per couple. But current law calls for a drop to $5 million/$10 million in 2026, which will be adjusted for inflation.

The Biden administration has suggested a return to the even-lower 2009 level of $3.5 million per person. Regardless of how the scenario plays out, now is the time for business owners to take note. Estates valued at $5 million or more may soon be facing steep levels of estate erosion.

Know the value of your estate
Before you give any thought to these changes, you need to know the current value of your estate, including your business. A few facts from The Miller Group’s trusted colleague John Degen, Certified Family Business Specialist of John Degen & Associates, LLC:

  • Owners of small to medium-size businesses ($2 – $100 million) have 80% of their net worth tied up in their businesses.
  • Of those, 83% have no written estate or business transition plan.
  • A vast majority don’t have a formal idea of their business value.

If you’re interested in getting an evaluation to help you frame this topic, let us know.

Find ways to protect your assets
Is the IRS your favorite friend? If so, you can stop reading now. But if you’d rather preserve as much of your estate as possible for yourself and your family, this is the right time to do some planning.

Rely on conventional strategies
Here are some of the classic strategies for protecting your assets from excessive estate taxes.

  • Establishing a current will, revocable trust and other important documents (advanced healthcare directives, etc.): These are the foundation of all good estate plans and they must be current and accurate.
  • Using your gift, estate and federal lifetime exemption: As stated above, the current limits are set at $11.7 million per person. This amount changes by law in 2026.
  • Annual gifts (aka Crummey gifts): You can give $15,000 per giver, per recipient. If you don’t use this in a given year, you can’t use it again.
  • Verifying ownership: What assets are in your name, your spouse’s name or jointly owned? How should you position them?

Consider unique tools
You also might want to consider these lesser-known options.

  • Grantor retained annuity trust: This is a staple of estate planning, and it works very well with certain assets (including business assets).
  • Spousal limited/lifetime access trust: How can you ensure that both spouses have access to liquidity when the other spouse has passed? This is an important consideration.
  • Dynastic trusts: As much as you may not trust adult children with assets, do you really want to give assets to grandchildren or great-grandchildren? Can you still manage gifted assets?
  • Multi-generational ownership of an entity: Should you consider joint ownership of certain assets with your heirs? What is the right way to do this?

The Miller Group is more than an insurance broker. We truly care about helping our clients protect their businesses and their families. Let us know if we can help connect you with the resources you need to investigate estate preservation strategies.

By Chris Miller, Vice President of Commercial

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