Under the current estate tax law, all persons have an estate/gift tax credit equivalent of $12,060,000 (2022) of property which can be transferred to others prior to death without the payment of any gift taxes. Any lifetime transfer will reduce the estate tax exemption. However, for the years 2026 and thereafter, the estate and gift tax credit equivalent will revert to $5,000,000 adjusted for inflation (approximately $6,000,000). The tax rate for transfers in excess of the exemption is 40% of fair market value. In 2022, the annual exclusion per donee has increased from $15,000 to $16,000 per year. This is the dollar amount that can be gifted without utilizing your lifetime gift/estate tax exemption.
Most high net worth clients are utilizing the current gift, estate, and generation-skipping transfer ($12,060,000) exclusion to their advantage, prior the reduction in 2026.
If your assets exceed the anticipated reduced estate tax exemption amounts ($6,000,000 Single / $12,000,000 Married), then maximizing the use of the current $12,060,000/$24,120,000 exemption, prior to a change in the law, should be considered. The most common strategy used to capture the current exemptions is to gift appreciating assets to an irrevocable trust for the benefit of a spouse, children and grandchildren. Some other strategies to consider are as follows:
The basic concept in each of these planning techniques mentioned above are to move assets that are currently subject to estate tax to beneficiaries (or trusts for beneficiaries) that are not subject to estate tax. All future appreciation of the transferred assets would also not be subject to estate tax.
Please contact us to discuss your specific needs and planning opportunities, if you believe because of your net worth, your family would benefit from any of the planning techniques mentioned above.
Therrel Baisden, LLP has served families and their closely held businesses since 1925. If you want greater legal protection to safeguard your future, call us to schedule an appointment. We are conveniently located at the SunTrust International Center in downtown Miami.