• November 30, 2022

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The amounts exempt from federal estate and gift taxes are adjusted for inflation each year. The IRS has come out with the exemption amounts for 2023.

Gift and Estate Tax Exemption: The amount you can give during your lifetime, or at your death, and be exempt from federal estate and gift taxes has risen from $12,060,000 to $12,920,000. This means that a married couple could gift more than $25 million in assets tax free. This exemption is, however, going away in 2026 as it reverts back to the prior exemption amount of $5 million, adjusted for inflation, or $7,000,000.

For surviving spouses, the martial deduction for gift and estate taxes remains unlimited except for surviving spouses who are not U.S. Citizens. For non-citizen spouses, the marital deduction is $175,000 for 2023.

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Annual Exemption: In addition to the lifetime exemption, there is also an annual gift tax exemption. That annual exemption goes from $16,000 to $17,000, in 2023 for each person you make a gift to in 2023.

If you have not already made gifts that use some or all of your 2022 annual or lifetime exemption, now may be a good time to do so, as many investment assets have suffered a 25%-35% decline in value since the beginning of the year, but are expected to recover their value in the medium to long term. Making a gift of these discounted investments that are then held by or for your beneficiaries, means that you are leveraging the increased exemption by gifting investments at a discount.

Be aware of the way the exemption will be applied in 2026, when the exemption reverts to the prior law. If you gift less than the exemption amount, (currently $12,920,000), by 2025, then you will be limited to the lower exemption (now $7 million), for gifts after 2025, in effect losing the nearly $6 million difference.

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