Federal Gift & Estate Tax Exemption Update

When putting a plan in place it is always important to be aware of the current Federal gift and estate tax exemption levels.

Under current federal gift and estate tax laws, each year the U.S Treasury adjusts the lifetime Federal gift and estate tax exemption amount as it relates to inflation. In 2022 the exemption amount for individuals has been increased from $11,700,000.00 to $12,060,000.00 for each individual, meaning that for married couples who have a right to double their exclusion, a total of $24,120,000.00 may be excluded before donees or heirs will incur gift or estate taxes.

Additionally, the annual gift tax exclusion amount has been increased from $15,000.00 to $16,000.00 per recipient ($32,000.00 per recipient if giving is made by a married couple, with each person giving $16,000.00).  This annual exclusion amount represents the amount of money that one person (or a couple) may transfer to another person without affecting having to file a gift tax return.  The other benefit under current law is that these transfers do not affect the overarching lifetime exclusion.

It is important to note that as of right now, the lifetime exemption amount is set to “sunset” and is projected to drop back down to $5,000,000.00 per individual in 2026, which could impact the current planning strategy for those with larger estates.

Individuals that anticipate leaving behind larger estates may find it beneficial to consider taking advantage of current exclusion amounts.  If you are interested in determining the best estate planning strategy for you, please give us a call at (804) 423-1382 to schedule a consultation – we would be happy to assist!