Understanding the Estate & Gift Tax Exemption

The Estate Tax and Gift Tax are federal taxes levied on the transfer of a person’s wealth upon their death or when a gift is made during the donor’s lifetime that is beyond the exemption amount the donor has available.  Generally, the amount subject to taxation is at a predetermined tax rate, 40%.


Anticipated Changes for 2024 and 2026

Come January 2024, the federal Estate & Gift Tax exemption will rise $690,000 to $13,610,000 per person (in 2023 the current exemption amount is $12,920,000). For married couples, this means a combined exemption of $27,220,000 will be available in 2024. This high exemption amount protects a vast majority of estates from federal estate taxes. However, tax laws are subject to change, particularly with new administrations and shifts in political priorities.

The anticipation surrounding the 2026 estate tax exemption sunset provision may mean a significant change for many estates. Come January 1, 2026, absent any new legislative action by Congress, the exemption will sunset to the pre-2018 exemption amount of $5,000,000 with an index for inflation (many experts project this to be about $6,200,000) per person.


What Does This Estate Tax Exemption Sunset Mean and Why Does it Matter?

  1. Potential Impact on High-Value Estates:

A change in the estate tax exemption could have a profound impact on high value estates. If the exemption is lowered by the sunset of the current tax act, more estates will become subject to federal estate taxes.


  1. Tax Planning and Strategies:

If the anticipated exemption amount sunsets in 2026, individuals and families with significant wealth will need to reassess their estate planning strategies in advance of 2026. This may include adjustments to revocable and irrevocable trusts, gifting, and other estate planning tools to minimize tax liabilities and take advantage of the higher estate and gift tax exemptions that currently exist.


As 2024 approaches, it is crucial for higher net worth individuals and families to stay informed about potential changes in tax laws and to work closely with financial and legal professionals to adapt their estate planning strategies accordingly. If you, a friend, or family member needs assistance with planning to mitigate potential estate or gift taxes ahead of the rush to do planning before 2026, please connect with our Intake Department at (760) 448-2220 or at https://www.geigerlawoffice.co/contact.cfm.

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