One key gifting change is to the annual exclusion: you will be able to give anyone else (and as many people as you want) $17,000 in gifts in 2023, without worrying about using up your lifetime gift and estate tax exclusion or paying gift tax. That’s up from $16,000 in 2022 and $15,000 in 2021, where it had been stuck since 2018.
The other big change: the lifetime estate and gift tax exemption (also known as the unified credit), will jump to $12.92 million in 2023, up from $12.06 million in 2022. Since couples share their exemptions, it means a wealthy couple that starts making gifts in 2023 can pass on $25.84 million.
In addition to making annual $17,000 gifts, you can also pay unlimited amounts for anyone’s tuition or medical expenses, without eating into your lifetime exemption, so long as you make those payments directly to the school or medical provider.
The estate tax is assessed at a 40% rate for the largest estates. But the $12.92 million per-person lifetime exemption is really only a starting point for the very rich when it comes to wealth transfer. A variety of planning techniques involving GRATs and other trusts can be used to leverage that exemption. Even today’s bear market provides planning opportunities.
Whether the estate and gift tax exemption will actually decline so dramatically will depend, of course, on the political control of Congress and the White House come 2025 and 2026 and the budget and deficit pressures of the day. (An early version of the Democrats’ proposed Build Back Better Act would have cut the exemption in half—but that provision was unlikely to win the support of more conservative Senate Democrats.)
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