Two Bright Sides of Estate Planning During COVID-19

There have been arguably few financial “silver linings” that we can point to in recent months, but there are two (2) opportunities at this time worth noting for wealthy clients interested in mitigating estate and gift taxes.  

  • Generous Exemption Amount in 2020:   The exemption amount from federal gift and estate tax is quite significant in 2020 compared to prior years.  This year, an individual can transfer up to $11,580,000 ($23,160,000 for a married couple) free of federal gift and estate tax, which is compelling since taxable gifts in excess of that threshold are taxed at a flat rate of 40%.  However, this exemption is scheduled to revert to its pre-2018 level (i.e., approximately $5,850,000, indexed for inflation) after December 31, 2025. Depending on the outcome of the November 2020 federal elections, it is possible that Congress will enact legislation prior to 2026 that reduces the exemption even further and/or increases the gift tax rate above 40%. Because the current exemption is the largest it has been in the history of the transfer tax and because it may only be available for a short time, we believe that clients should take advantage of the exemption whenever possible by utilizing sound, low-risk estate planning techniques that transfer wealth to younger generations at little or no transfer tax cost. In addition, while asset values are temporarily “depressed” due to recent market volatility and turbulent global conditions, clients may be able to further leverage the substantial exemption by transferring assets in 2020 with the hope that those assets values rebound in the hands of the beneficiary over the course of future years.
  • Historically Low Interest Rates:  Treasury-prescribed interest rates applicable to certain estate planning transfers are at a historic low. Lower than normal interest rates continue to be favorable for clients who engage in certain estate planning techniques that are tied to the IRS assumed rate of interest rate (or “hurdle” rate) under Section 7520 of the Internal Revenue Code.  This rate has recently been set below 1% at 0.6% for transfers made in July 2020, making certain estate planning strategies, such as the “grantor retained annuity trust” or “GRAT,” especially powerful.  If a client desires to gift assets that are likely to appreciate beyond the IRS modest hurdle rate of 0.6%, the GRAT technique could render a huge tax savings and thereby result in more assets falling into the hands of the beneficiary. In addition, intra-family loans afford clients significant opportunities to move assets to junior family members right now since the required minimum interest rate (AFR) governing such loans will be as low as 0.18% – 1.01%, depending on the term of the loan.


In general, interest rates and tax exemptions change frequently and perhaps even cyclically.  If you are interested in learning how to capitalize on the current low interest rate environment and optimize your estate tax exemption to further your estate planning goals most efficiently, please contact us.

The Trust and Estate Private Client Group of Sichenzia Ross Ference, LLP, hopes that you and your loved ones are managing to stay safe and healthy.  

Although we continue our remote working environment due to the COVID-19 pandemic, we are still available and able to assist you with all of your trust and estate planning needs.

Please contact Robert Birnbaum, Esq., or Carolyn M. Glynn, Esq. if you are interested in learning more about this or other estate planning topics.

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Robert Birnbaum
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    Carolyn M. Glynn
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