In 2023, the federal lifetime gift, estate, and GST tax exemption amount was $12,920,000 per person. Those amounts have increased for 2024, and here are some things to consider with regard to federal estate taxes for 2024 and beyond:
- As of January 1, 2024, the federal lifetime gift, estate, and GST tax exemption amount increased to $13,610,000 per person or $27,220,000 for a married couple.
- High net worth individuals and couples who have already fully used their existing federal exemption amount based on the prior exemptions may want to look at additional gifting in 2024.
- The annual exclusion amount for gifts increased to $18,000 per recipient in 2023. This means that an individual can gift up to $18,000 ($36,000 for a married couple) to any person without incurring a gift tax or having to file a gift tax return (IRS Form 709).
- In addition to gifts, there may be an option to pay unlimited amounts for certain tuition or medical expenses, so long as those payments are made directly to the school or medical provider.
- A variety of planning techniques can be used to leverage the existing exemption prior to a future decrease.
It is important to note that the current federal exemption amount is not guaranteed to last. On January 1, 2026, the base estate tax exemption amount is scheduled to decrease back down to $5,000,000 per person (as adjusted for inflation, this amount will likely fall around $7,000,000 or so). As such, now is the time to act.
In addition to the federal gift and estate tax, Minnesota also has its own state-specific estate tax. Minnesota’s state-specific estate tax exemption remains at $3,000,000 per person for 2024. The Minnesota estate tax exemption amount has not changed since 2020, and under current law the Minnesota estate tax exemption is scheduled to remain at $3.0 million until new legislation occurs. The Minnesota estate tax rates range between 13 and 16 percent.
Please contact our attorneys in the Trusts & Estates Practice Group if you would like to evaluate and discuss gifting and tax strategies given the new exemption amounts and expected future changes.
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