Attorney
Have you heard that a significant change in D.C.’s estate tax exemption is coming for 2021? Back in August of 2020, the mayor of the District of Columbia signed into law the Estate Tax Adjustment Act of 2020. While the current 2020 D.C. estate tax for 2020 decedents sits at $5,762,400, the new law will reduce it down to $4 million per person. With such a substantial change, many should consider reviewing their estate plans now to see if the new law will impact them.
This decrease in D.C.’s estate tax exemption comes in the wake of significant budgetary issues brought on by the COVID-19 pandemic. D.C. is among several jurisdictions looking for ways to increase revenue to combat the financial strains of the coronavirus health crisis. Decreasing the estate tax exemption means being able to cast a wider net for purposes of death taxes. In fact, it is anticipated that the reduction in the estate tax exemption set forth by the Estate Tax Adjustment Act of 2020 will raise an additional $1.8 million in revenue in just 2021.
The new, lower D.C. estate tax will apply to those who die on January 1, 2021, or later. It will increase annually, but only to the extent of any cost of living adjustment. For now, those in D.C. should be mindful of how this over $1.7 million dollar reduction in the estate tax exemption may impact their estate. The D.C. estate tax comes on top of any federal estate tax obligations that may come due on an estate. There is, however, usually an allowable deduction for state death taxes when the federal estate tax is being calculated.
If you are a D.C. resident, now is the time to review your current estate plan in light of this new law. The Law Offices of Clifford M. Cohen is here to assist you. Please Contact us at (202) 895-2799 or email us at cliff@cmCohenLaw.com to schedule a meeting.