New Estate Tax-Related Numbers for 2024
It’s a new year, and that means new tax figures relevant to estate planning. Each year, the IRS looks at a variety of numbers embedded within the tax code and decides whether those numbers need to be adjusted upward to account for inflation. In most years, we see increases to the lifetime exemption amounts from the estate, gift, and generation-skipping transfer (“GST”) taxes, as well as an increase to the gift tax’s annual exclusion amounts. Many other important figures receive periodic increases, including the amounts that may be contributed to retirement accounts in a given year, though those figures are beyond the scope of this article.
This article will not go into depth about how these numbers work; that will be the done in a future blog post. This article simply seeks to present several of the recently updated figures that estate planners and their clients may need to reference throughout 2024 and compare them to last year’s numbers. As always, if you have questions about anything in this article or would like to talk about what these numbers mean for you and your estate plan, I hope you will get in touch to schedule a consultation. Initial meetings are always free for new clients.
The numbers:
Estate/Gift/GST Tax Lifetime Exemption: $13.61 million in 2024, up from $12.92 million in 2023
Gift Tax Annual Exclusion: $18,000 per donee in 2024, up from $17,000 per donee in 2023
Gift Tax Annual Exclusion for Gifts Made to Non-U.S. Citizen Spouse: $185,000 in 2024, up from $175,000 in 2023
A few things to keep in mind:
The estate tax lifetime exemption and gift tax lifetime exemption are linked together and are referred to as the “unified tax credit.” If any of a person’s gift tax exemption amount is utilized to shelter a gift from tax, that person’s estate tax exemption will be reduced by the same amount. Put another way, the more a person uses their gift tax exemption during life, the less estate tax exemption they’ll have available to shelter their estate from tax at death.
A married couple can essentially combine their estate tax exemptions. The first spouse to die can give his/her unused estate tax exemption to the surviving spouse by making an election on an estate tax return. This means a married couple can shelter a total of $27.22 million from the estate tax under the current exemption amounts.
Unlike unused estate tax exemption, unused GST tax exemption cannot be given to a surviving spouse.
A married couple can elect to “split a gift” in order to apply both of their annual exclusions to a single gift. If Spouse 1 wants to make a gift in excess of Spouse 1’s annual exclusion amount, Spouse 2 can make an election on a gift tax return to join in the making of the gift, after which point Spouse 2’s annual exclusion amount can be used toward sheltering Spouse 1’s gift from gift tax. Therefore, a married couple can use the gift splitting technique to give up to $36,000 to a single donee in a given year without having to utilize their lifetime exemption amounts.
The lifetime exemption amounts for the estate, gift, and GST taxes are scheduled to be reduced by half at the end of 2025. The current estate/gift/GST tax exemption amounts listed above are based on a baseline figure of $10 million which has been periodically increased for inflation. The baseline figure will become $5 million in 2026 unless Congress acts to preserve the current $10 million baseline figure.
As the numbers listed above illustrate, the estate, gift, and GST taxes are not currently a cause for concern for most Americans. But for anyone whose assets approach or exceed the current lifetime exemption amounts, or for anyone whose assets would approach or exceed the reduced exemption amounts expected to arrive in 2026, it is important to act now to establish an estate plan that reduces or entirely avoids estate taxes. If you would like to review your financial situation with an estate planner to see how the estate, gift, and GST taxes might impact you, please feel free to get in touch to schedule a free consultation.
The information contained in this blog post is intended only as general legal information and should not be construed as formal legal advice on any matter, nor should its presentation be construed as intent on the part of The Law Office of Ryan A. Layton, PLLC to form an attorney-client relationship with any user of this website. For more information, please see this disclaimer.