Estate Planning Changes 2023

 The good news is the estate tax exclusion for 2023 has increased to $12.92 million. This is the total amount that can be given by one person during life or upon death.

A married couple can pass a combined amount of $25.84 million with the proper trust provisions or filing the appropriate estate tax return upon the death of the first spouse.

The bad news is that at the end of 2025, the exemption amount will drop to about $6 million per person unless Congress acts.

Persons with estates (including life insurance and IRAs) that are larger than $6 million (or $12 million per couple) may need to consider gifting assets to lessen their estate's value prior to the end of 2025. Last year, the IRS reported that if a person made a gift prior to the expiration of the law and died after the change in the law, then IRS would not "claw back" the taxes.

Previously, when the estate tax exclusion was going to sunset, Congress extended the law, but after the expiration. While the extension was made retroactively, this emphasized that we really do not know how and when Congress will act. Persons with large estates should consult with their tax and financial professionals to determine if a gifting plan makes sense. Then, that plan can be executed with legal documents.

There are gifts that can be made during a person's life that do not diminish what can be passed estate tax free at death. Gifts in the amount of the annual gift exemption can be given to multiple persons each year. The 2023 annual gift exemption is now $17,000.

The new federal exclusion does not change the need for a trust to avoid probate.A trust is still very helpful to limit administration expenses, provide for minors and for the smooth transition of corporate stock and LLC ownership.