The 2023 Gift and Estate Tax Exemptions

The 2023 Gift and Estate Tax Exemptions

Under the Federal Estate Tax Exemption, individuals may exclude a certain amount of money from estate taxes when a person passes away.  In other words, when you pass away, you can pass a certain amount to your beneficiaries without paying federal estate tax if the value of your estate is less than the exemption amount.  Each year, the Government announces a new Estate Tax Exemption along with a Gift Tax Exemption.  The Gift Tax Exclusion allows individuals to make tax free gifts during their lifetime which reduces their taxable estate by moving assets out of their ownership. 

In 2023, the annual Estate Tax and lifetime gift tax exemption has increased to $12.92 million per individual, up from $12.06 million in 2022.  No different than past years, the exemption can be used between spouses, therefore a married couple may gift a value up to $25.84 million before paying estate tax.

Additionally, the gift tax exclusion for 2023 has increased to $17,000, up from $16,000 in 2022.  It is important to note that the gift tax exemption is per individual receiving the gift, not per the individual giving the gift.  For example, if you have four children, you can give each of them a gift up to $17,000 tax free each year.  

For the majority of individuals, this allows them to transfer wealth to the next generation tax-free. It is important to proactively plan, and with the use of proper planning tools such as revocable trusts, irrevocable trusts, life insurance and a basic will, you can ensure that as much of your estate will be passed to your beneficiaries estate tax free as possible.

Contact Asset and Estate Law, PLLC for a complimentary consultation to learn more about Estate Planning and Asset Protection.