Trends from Prior Years Continue

The IRS has announced an $860,000 increase per person in the amount of an estate that is exempt from taxes. The 2023 Estate Tax Exemption will be $12.92 million, or $25.84 Million for a married couple (since the estate tax exemption is portable between spouses). This development is not surprising given the rapid rise in the Consumer Price Index and will provide some relief to those who will inherit in the coming year.

Also, the gift tax limit has now been increased to $17,000 ($34,000 from a married couple) and can be given to as many people as you wish this year. This does not eat into your lifetime exemption, meaning you can gift your loved ones up to the yearly limit each year without counting towards your final estate taxes.

In 2012, the estate tax exemption was set to a $5 million base with the intention to be indexed for inflation and updated annually. In 2017, that base was doubled (which is how we are already at $12.92 million). However, the law states that in 2026, the individual base exemption will return to the $5.0 million (which could put it in the $6-7 million range after inflation adjustment).

State Estate Taxes: An Often Overlooked Aspect of Estate Planning for Wealthier People

Each state usually updates its estate tax parameters at the beginning of each year. Too often, people overlook state implications in overall estate planning. The new year brings some changes in the states where I practice, which I summarize below for my clients:

New York

In 2023, New York has updated the basic exclusion amount, the amount below which an estate does not need to file an estate tax return, to $6.58 Million (or by using establishing a trust equal to the estate exclusion amount upon the death of the first spouse, up to $13.16 Million for a married couple). If the value of your estate exceeds this limit by up to 5%, or $329,000 this year, you only pay tax on the amount over $6.58 Million. However, estates worth more than 105% of the exemption amount are subject to tax on the ENTIRE estate.

Connecticut

In a departure from last year, Connecticut now will match the federal exclusion amount in 2023: $12.92 million or $25.84 Million for a married couple.

Florida

Florida has NO estate tax and is highly unlikely to institute one. This is a factor why many higher net worth individuals from the NY tri-state area with second homes in Florida formally migrate their residence to the sunshine state.

New Jersey

New Jersey eliminated its estate tax on Jan 1, 2018.

Learn more about how to do estate planning that puts tax considerations front and center.