Nothing is Certain, Except Death and Taxes

The federal government imposes estate and gift taxes on all tax payers in the United States. You may deal with gift taxes every year, but estate taxes will only be due upon your death.

Everyone likes a gift right? The good news is you won’t be taxed on any annual gifts under the annual federal exclusion amount. In 2023 that amount is $17,000 per recipient. If you’re married you can combine that with your spouse’s exclusion and gift $34,000 per year per recipient. Any gifts under the exclusion amount are also not subject to estate taxes or generation skipping transfer taxes. The annual gift tax exclusion has historically increased every few years, but keep in mind, Congress (yay!) gets to levy taxes and they can always decide to change the exclusion amount. That’s why it’s important you work with both a good accountant and estate planner if you want to take advantage of the gift tax exclusion. If your gift exceeds the annual gift tax exclusion amount, it will start to chip away at your overall estate tax exclusion amount.

The estate tax is a tax that is levied on your estate when you die. Not everyone will owe an estate tax and even if you are subject to the tax, there are a lot of ways you can reduce what you may owe. It might feel frustrating to be taxed twice on your estate (once during life and once at death), but that’s why having an estate plan is important to help you find the best way to maximize the amount you can leave your family. In 2023, the annual exclusion amount is $12.92 million per person. That amount is doubled for married couples. While this is an exceptionally high estate tax exclusion amount, the exclusion is set to revert to prior levels in 2026. There is always the possibility of a change to the tax laws before 2026. If your estate hovers around an estate tax level, it is a good idea to have appropriate tax planning in your estate plan. While regular updates to your estate plan are always a good idea, you also want to avoid reworking your estate plan every time there is a change in the White House or control shifts in Congress. Working with a knowledgeable estate planner is the best way to ensure that you have the appropriate long term planning.