Provided by Bart Gibson, Senior Vice President - Wealth Management, The Harris Gibson Group, UBS Financial Services Inc.

For some, now may be the best time to take advantage of estate planning for tax mitigation. With record high gift and estate tax exemption, near record low interest rates, and depreciated assets as a result of the pandemic, Americans are in a unique position to take advantage of the estate planning strategies. But there’s no guarantee how long it will last.

Under the current law, an individual can give away USD 11.58 million (USD 23.16 million for married couples) to others during his or her lifetime or at death without being subject to gift or estate taxes (which have a top tax Federal rate of 40% for amounts over USD 1 million).

These amounts are set to continue to increase with inflation through 2025, after which they’ll decrease back to about USD 5 million per individual. But this law was enacted long before a significant increase in government spending due to the COVID-19 pandemic. It is unclear if the current economic and fiscal situation will require Congress to decrease the exemption amounts before they “sunset” in 2025. The potential for this may be greater with a potential Democratic administration or Congress in a “blue wave” scenario.

Such policy changes may also come with additional restrictions. Former Vice President Joe Biden's campaign has proposed taxing unrealized capital gains at death—and on lifetime gifts, according to an analysis by the nonpartisan Tax Policy Center. If implemented, these changes would considerably alter the landscape for taxpayers' ability to manage taxes when transferring wealth to their family.

Want to give to others, and not to the IRS?

Even if your estate is well below the exemption amount today, it may grow beyond that amount by the time you end up transferring the assets.

The lifetime exemption will go up a little next year as planned., Being proactive today will help you take advantage of the higher exemption by transferring the incremental amount out of your estate. Regardless of the outcome of the election this November, there is a limited amount of time remaining to take advantage of the higher exemption amounts.

There are several ways investors can prepare for the potential impact a change in the laws will have on estate planning:

1. Clients should consider ways to begin thinking about the best ways to transfer assets out of their estate now. Even if the law does not change next year, being proactive won't stop you from taking advantage of higher exemptions out of your estate. Think about taking the opportunity now to transfer large assets on a tax-advantaged basis.

2. Whether estate or general tax planning, consider harvesting gains (as opposed to losses) to ensure you are paying current long term capital gains rates that may be increased or eliminated (changed to income tax rates) in upcoming years.

3. Consider using life insurance as a way to "pay" for the inevitable estate tax bill that may be left to heirs.

4. If part of the estate and tax plan is to utilize charitable giving then consider gifting in times like this when charitable contributions may be even more impactful given the environment.

It often feels too soon to have an estate planning conversation, but taxes aren't the only reason to begin the process. There are also many important family considerations. The biggest impact we can have on our families and our communities often comes through intentional lifetime gifting—where we can share in the benefit that comes from our hard-earned savings—rather than through an end-of-life bequest.

Bart Gibson is a Senior Vice President - Wealth Management, The Harris Gibson Group, UBS Financial Services Inc. He can be reached at bart.gibson@ubs.com.

This article has been written and provided by UBS Financial Services Inc. for use by its Financial Advisors.

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