2020 Wealth Transfer Tax Numbers
The IRS announced annual inflation adjustments for estate, gift, and generation-skipping transfer tax (GST) exclusion amounts in November 2019. For the year 2020, the annual federal exclusion will increase from $11.4 million for an individual, to $11.58 million. Meaning, with proper planning, a married couple may be able to transfer a combined total of $23.16 million in 2020 free of estate, gift and GST taxes. This increased exclusion applies to a person’s (a) applicable exclusion amount available at death, (b) lifetime gift applicable exclusion amount, and (c) GST applicable exclusion amount.
The federal estate, gift, and GST rates still remain at 40% and the annual gift tax exclusion sill remains at $15,000 per-donee. The annual federal gift tax exclusion amount to gifts made to a non-citizen spouse will increase to $157,000. However, gifts made between spouses that are US citizens are to remain unlimited.
It’s important to note that in order to apply a spouse’s annual gift tax exclusion amount against a gift by the other spouse to a third party, a gift tax return must be filed. Meaning if Spouse A wishes to gift $25,000 to a third party and remain under the annual exclusion, a gift tax return must be filed showing that the additional $10,000 is from Spouse B’s annual exclusion amount (this is known as “gift-splitting”).