Friday, August 14, 2020
Millennials are set to inherit $30 trillion from boomers over the next two decades, making them America's wealthiest generation. However, the coronavirus pandemic will likely impact the trend. "Covid-19 has forced many Americans to think more seriously about their own mortality and the legacy they’ll leave behind."
The changes to estate tax legislation is one of the major issues concerning the wealth transfer from boomers to their heirs. Many Americans are having to choose between paying millions in estate taxes or passing on their fortune to their children or grandchildren.
" Because it is so substantial, estate tax created a large incentive for people to create trusts instead of wills, as trusts are more dynamic – in the sense that you can change or amend them as you wish."
A bypass or AB trust, for example, allows married couples to avoid certain estate taxes when one of them passes away. "By putting $600,000 in a special trust, a wife could inherit $600,000 from her husband with unlimited exemptions."
The estate tax exemption number has grown over the years rising from $600,000 to $5 million. Before 2017, if the value of your estate was less than $5.49 million per person or $11 million as a couple, you would be exempt from the 40% estate tax. However, President Trump double that exemption with the Tax Cuts and Jobs Act in 2017. The Act raised the exemption amount to $11.58 million per person.
See Nick Stonnington, Why High-Net-Worth Boomers Should Consider Gifting Their Estates In 2020, Forbes, August 6, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.