On November 9^th this year, the IRS made history by announcing the HIGHEST EVER applicable Estate and Gift Tax Exclusions for US Citizens for tax year 2024 – they are increased to $13,610,000.00 per person, or $27,220,000.00 for a married couple. 

This is a $690,000 increase from year 2023. For high-net-worth individuals and families who wish to reduce their taxable estate, this is a continued opportunity to gift-gift-gift tax-free into 2024.

Conversely, the Estate Tax Exclusion for Non US Citizens and Non-US-Residents remains at only $60,000.

Moreover, on November 26^th, the IRS confirmed that US Citizen taxpayers making lifetime gifts under the increased gift tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted (such gifts will not be “clawed back”) after December 31, 2025, when the exclusion amount is scheduled to drop to the pre-2018 levels (of approximately $6 million).

Another way to take advantage of the highest estate tax exclusion of all time is to claim the portability election in the event a spouse dies in 2023 or 2024. Claiming “Portability” (by filing an Estate Tax Return within 9 months of the first spouse's death) permits the surviving spouse to “port” or “transfer over” to the second death the unutilized portion of the deceased spouse's individual estate tax exemption applicable in the year of death. This “ported” exemption will be in addition to the applicable estate tax exemption in the year of the second spouse's death, and help exclude even more assets from the federal estate tax.

This is especially important since – under current tax law – the individual exemption is set to return to its 2017 value, indexed for inflation – or, to about $6,000,000 on January 1, 2026. This means that after December 31, 2025, decedents' estates that exceed the 2026 exemption (of about $6 million) will be subject to estate (death) tax – with a top tax rate of 40%!  And, that tax is due and payable within nine months of the death.

Another way to “chip away” at a taxable estate is to take advantage of the Annual Gift Tax Exclusion – which is increased to $18,000 per person for 2024 (up from $17,000 in 2023). This means that a married couple can give (jointly) $36,000 to each of their children, each of their grandchildren, or any other individual, without having to file a Gift Tax Return in 2024, provided these individuals are US Citizens. Note that if annual gifts exceed the exclusion of $18,000, an IRS Gift Tax Return is required to be filed, with an appraisal of the gifted property attached to such return.

The Annual Gift Exclusion to a non-US Citizen Spouse also went up to $184,000 from the 2023 limit of $175,000. This is very important for married couples where one spouse is not a US Citizen and/or not a US Resident, as non-US-Citizens/non-Resident spouses are not entitled to utilize the “unlimited marital deduction” that is afforded to US Citizen spouses.  Lifetime gifts to a non-US-Citizen spouse would decrease the US Citizen spouse's taxable estate, while passing the family assets to the non-US-Citizen spouse estate tax-free by way of such annual gifts.

Again, the Estate Tax Exclusion for Non US Citizens and Non-US-Residents remains at only $60,000.

Such couples would also be very wise to set up a Family Qualified Domestic Trust (a QDOT Trust) whose terms “mimic” the unlimited marital deduction that US-Citizen-spouses enjoy by deferring payment of estate taxes to the second death – if the lifetime gifting noted above is not feasible.

To get started on your estate planning, or to update an existing estate plan, schedule a consultation to chat  – we are here to help.