We started our law firm in spring 2012 and vividly (and gratefully) remember the extra boost we received from planning by many clients that year because the exemption from the federal gift and estate tax was scheduled to drop on Jan. 1, 2013, from $5.12 million to $1 million. At the moment, the exemption is again scheduled to drop from its current level of $11.58 million to $5 million indexed for inflation, but, not until 2026. However, many high net worth individuals are fretting that if there is a swing to the left in the federal government after the November election, the exemption could easily be reduced sooner, and very possibly below the $5 million level. It is widely recognized that as a technical matter, if there is the political will to do so, the exemption could be reduced in 2021, after a new president might be sworn in, effective as of Jan. 1, 2021.

After the exemption was increased to its current all time high beginning in 2018, our article in The Legal on Jan. 9, 2018, traced the history of the exemption from the 1990s to present. We noted that the change from $600,000 in the ’90s to the then-current level reflected increases of about 90% per year. By contrast, a quick inflation adjustment calculation (Google sourced) reflects that $600,000 in 1996 dollars is equivalent to slightly less than $1 million in 2020. A patently stark differential from the current exemption levels that certainly gives reason for concerns about potential retrenchment.

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