Smart estate planning requires understanding the present and preparing for the future. Some events that can affect your plan stem from major life events – a new job, having children, getting married. Others stem from changes in the law. One example lies in the increased exemption of the gift, estate and generation skipping transfer (GST) tax in 2023.
Inheriting or passing on wealth may require review in light of this change.
The GST exemption refers to the amounts an individual can transfer free of the gift and estate taxes. The current estate tax exemption, $12,060,000, increases by $860,000 to $12,920,000 this year as part of an adjustment for inflation.
This means that an estate will have to be worth almost $13 million before it triggers the federal estate tax.
However, these high exemption rates won’t necessarily last forever. The exemption will be cut in half in 2026. After that, the law will, adjusting for inflation, exempt only $5 million.
For those who plan on making a gift to heirs, the difference costs more than a penny.
Best options to consider
At first glance, these changes seem to affect only the wealthiest Americans. However, real estate prices have risen in many parts of Georgia in recent years, and so it isn’t so hard for an estate to top $5 million if it includes any real property.
The prospects for the actual exemption amount remain subject to Treasury Department and Internal Revenue Service regulations that could change before 2026.
Estate planning involves action based upon information available at the time of the decision. The demands of work and family can monopolize time.