Estate Tax Exemptions 2020

November 2019

Federal Estate Tax Exemption

As of January 1, 2020, the federal estate tax exemption amount will increase to $11.58 million, up from $11.4 million in 2019. The top marginal federal estate tax rate remains at 40%.

The recent increases in the federal estate tax exemption amount are a result of the Tax Cuts and Jobs Acts (TCJA) passed in late 2017. Under the TCJA, the federal estate tax exemption doubled from 2017 to 2018 and will continue to increase (as adjusted for inflation) until 2025.

It is important to note that absent further legislative action, these increases to the federal estate tax exemption amount are scheduled to sunset effective January 1, 2026. Under current law, this means that come 2026, the federal estate tax exemption amount will revert back to 2017 levels, as adjusted for inflation. 

Annual Exclusion for Gifts

The annual exclusion amount for gifts in 2020 will remain at $15,000. There has not been a change in the annual exclusion since the amount increased from $14,000 in 2017 to $15,000 in 2018. This means that individuals can gift $15,000 to any person without incurring a gift tax or having to file a gift tax return (IRS Form 709). Any gift in excess of the $15,000 will reduce the federal estate tax exemption available at the time of death. For married couples, this means they could give up to $30,000 to each child.

Minnesota Estate Tax

As of January 1, 2020, the Minnesota estate tax exemption amount will increase to $3.0 million, up from $2.7 million in 2019. The top marginal Minnesota estate tax rate remains at 16%. Legislation in 2017 set the estate tax exemption amounts for the years 2017-2020, and under such legislation, there will be no further increase in the Minnesota estate tax exemption amount.

Next Steps?

Please contact FMJ’s Trusts & Estates attorneys at estateplanning@fmjlaw.com if you have any questions about the 2020 estate tax exemptions or if you have any other estate planning questions that you would like to discuss.