Tax blocks

Happy New Year! 
I hope that 2023 is a healthy and prosperous year for all.

I know that it is 2023, but it’s not too early to be thinking ahead to 2026. Absent Congressional action, the estate tax exemption will be cut in half. Now, this only affects a small number of people, but it’s worth taking a look at for several reasons.

First, your gross estate includes IRA and retirement plan balances (even though these have designated beneficiaries). The estate tax threshold will be approximately $6.8m for an individual and $13.6m for married couples for those dying after January 1, 2026. The current numbers are roughly $12.5m for an individual and $25m for a married couple. That’s quite a drop and it may affect your estate (think real estate values appreciating), so it’s important to plan ahead.

There are numerous strategies available to avoid or offset estate tax issues. They are too complex and too personal to go into detail here. One strategy is gifting under the gift tax limit. Currently, you can give $16,000 to an unlimited number of people without reporting the gifts or having it reduce your estate tax exemption. This means a married couple can give each child, each grandchild, and a child’s spouse $32,000 a year.  For families near the estate tax threshold in 2026, a simple gifting plan may be enough to eliminate estate tax worries. Other strategies may include Life Insurance Trusts or Charitable Remainder Trusts. If you have any questions or concerns about potential estate tax liability, we’re here to help.

Stay safe and well!

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