If you implemented an estate plan more than a year ago, or don’t yet have one in place, it may be time to revisit your situation. Estate and gift tax rules, along with related figures and exemptions, are updated almost annually and staying current is key to minimizing taxes for your heirs. As an estate planning lawyer, I get asked frequently – how could changing laws and rates impact me? Here’s an overview of what’s new for 2023.

The federal estate tax exemption increased to $12.92 million per person this year, up from $12.06 million in 2022. For a married couple, the combined exemption is over $25 million. This means you can pass a significant amount of assets to beneficiaries estate tax-free at the federal level. However, taxes may still apply at the state level in certain areas of the country.

In addition, the annual federal gift tax exclusion got bumped up to $17,000 per recipient in 2023. This allows you to reduce estates through lifetime gifts to transfer more to the next generation tax-free. Lifetime transfers also carry favorable income tax implications in many cases. On the other hand, gifts no longer receive the valuation discounts they once did.

With higher exemptions, the focus of many estate plans has shifted more towards income tax planning, including techniques to maximize beneficiaries’ tax basis on inherited assets. Basis changes at death may eliminate all capital gains exposure on appreciated property. Timing transfers correctly can result in huge tax savings down the road for your loved ones.

As laws change rather frequently lately, existing estate plans may no longer accomplish what you need given your family dynamics and the size of your estate. I recommend touching base with an estate planning lawyer at least annually to evaluate whether updates could save your beneficiaries money. Don’t leave things to chance – a small adjustment today could make a huge financial difference for heirs later on!

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