By David Weinstock | Kiplinger
The new year has brought notable changes to federal gift, estate and generation-skipping transfer (GST) tax rules. Inflation adjustments for 2024 offer fairly substantial increases to gift and estate tax exemption amounts, along with increases to annual exclusion gifts, which individuals and families should be aware of in order to maximize the potential tax benefits.
The adjustments made to exemptions by the IRS should prompt taxpayers to reassess their estate and gifting plans, focusing on enhanced tax efficiency and more impactful wealth transfer between generations. The federal estate tax and GST tax lifetime exemption amounts have increased by $690,000 for individuals in 2024 (to $13.61 million from $12.92 million in 2023) and $1.38 million for married couples (to $27.22 million in 2024 from $25.84 million in 2023).
The generation-skipping tax exemption is currently the same as the estate tax exemption, and it enables people to transfer assets directly to grandchildren or in trust for their benefit. This generation-skipping transfer (GST) strategy helps families avoid paying estate taxes twice — once when the assets pass from generation one to generation two and again when they pass from generation two to generation three.
So, this year, individuals can gift or bequeath to their heirs or grant a GST of up to $13.61 million free of federal estate or generation-skipping taxes. The dollar figure is doubled for married couples.
These 2024 increases represent a perfect opportunity for families to connect with an expert to ensure their plans are optimized for the higher tax exemption limits. This is especially important because these lifetime exemption amounts, which were roughly doubled in 2017 when the Tax Cuts and Jobs Act was signed into law, are set to expire on December 31, 2025, unless congress passes new legislation. If current law expires, the federal lifetime tax exemption amounts will be cut roughly in half.
Additionally, the federal gift tax annual exclusion amount jumped almost 6% in 2024 to $18,000 per donee, up from $17,000, providing an additional avenue for more tax-efficient wealth transfer. This is also applicable to GSTs. Individuals should use this as an opportunity to implement well-thought-out gifting strategies that benefit both estate preservation and intergenerational wealth transfers.
“The article underscores the significant changes in federal gift, estate, and generation-skipping transfer tax rules in 2024, emphasizing the need for individuals and families to reevaluate their estate and gifting plans to maximize tax benefits. It highlights the considerable increases in exemption amounts, particularly for married couples, and stresses the importance of seizing the current opportunity before the potential expiration of these enhanced exemptions by the end of 2025. The piece provides valuable insights into various gifting strategies, including annual gifting, trusts such as GRATs and SLATs, and the importance of considering state-level estate and gift taxes. It is crucial for individuals to seize the opportunities presented by the current tax landscape before they vanish at the close of 2025. Otherwise, estates surpassing the lifetime exemption threshold could face a hefty 40% federal estate tax”. -George Finn, Rose Law Group Transactional Attorney.
