In 2024, significant changes to the IRS regulations regarding estate and gift tax exemptions are set to take effect. These updates, critical for individuals and couples engaged in estate planning, herald a substantial shift in the financial planning landscape. Jason Marx, partner in the Tax Trust and Estates Practice Group at Mandelbaum Barrett PC, provides insights into these changes and their implications.
The New Exemption Thresholds:
Starting in 2024, the IRS has announced an increase in the estate tax and gift tax lifetime exemption amounts. For individuals, this amount is now $13.61 million, up from $12.92 million in 2023. For married couples, the combined exemption amount has risen to a substantial $27.22 million. These figures represent a significant opportunity for high-net-worth individuals to plan their estates and gifts more strategically.
Annual Exclusion Amount Increase:
Alongside the lifetime exemptions, the annual exclusion amount – the amount an individual can gift tax-free per year – is also seeing an increase. Moving up from $17,000 in 2023 to $18,000 in 2024, this adjustment allows for more generous gifting strategies without incurring federal gift taxes.
Implications for Estate Planning:
Jason Marx emphasizes the importance of these changes in light of the impending sunset of current laws in 2026. Post-2025, unless the government intervenes, the exemption amounts are slated to be halved, reverting to the pre-Tax Cuts and Jobs Act figures. This potential reduction makes it imperative for individuals and couples to reassess and possibly restructure their estate plans to capitalize on the current higher exemption limits.
With the exemption amounts likely to decrease after 2025, proactive planning is crucial. Utilizing the higher exemption amounts now could result in significant tax savings and more efficient wealth transfer strategies.