Gift and Estate Tax Considerations

If a person dies, his estate is not subject to the federal estate tax if the value of his estate is less than the lifetime exemption amount ($12.06M for 2022 and $12.92M for 2023), adjusted for inflation. The exemption is the amount a person can transfer at death or during his life without triggering a gift or estate transfer tax.

The lifetime exclusion amount is set to be cut in half at the beginning of 2026 if Congress does not take action before then.  The IRS clarified that individuals taking advantage of the increased gift tax exclusion amount in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. 

In addition to the lifetime exemption amount, a person also has an annual gift exclusion amount which is set to rise from $16,000 per donee in 2022, to $17,000 per donee in 2023. This means that a person can give up to $17,000 to any donee without having to file a gift tax return or reduce his remaining exemption. Annual gifts that are in excess of the annual exclusion amount will reduce the available lifetime exemption amount.

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