Estate, Gift, and GST Exemptions for 2023
The Internal Revenue Service has announced inflation-adjusted figures for estate, gift, and generation-skipping transfer (GST) tax exemptions for 2023.
Key Changes for 2023
Annual Gift Tax Exclusion
The amount individuals can give annually without gift tax consequences has increased from $16,000 to $17,000 per person. Married couples can now give $34,000 combined without triggering gift tax obligations.
Lifetime Gift and Estate Tax Exemption
The federal lifetime exemption grew by $860,000, rising from $12.06 million to $12.92 million in 2023. Married couples can transfer a combined $25.84 million estate-free. The top federal rate remains at 40%.
Generation-Skipping Transfer Tax
The GST exemption increased to $12.92 million, affecting transfers to grandchildren or more remote descendants, as well as unrelated individuals more than 37.5 years younger than the donor. The GST tax rate stays at a flat 40%. Note: unused GST exemptions don’t transfer between spouses upon death.
Important Planning Considerations
The Tax Cuts and Jobs Act of 2017 increased exemptions, but they are scheduled to drop approximately 50% on January 1, 2026, unless Congress intervenes. Individuals concerned about lower future exemptions should consider transferring property now to utilize current higher limits. The 2019 “anti-clawback rule” Treasury Regulations support this strategy, allowing gifts structured in various ways and funded with diverse assets.
Recent Retirement Plan Changes
SECURE Act (2019)
Most non-spouse beneficiaries lost the ability to stretch inherited IRA withdrawals over their lifetimes. Instead, non-spouse beneficiaries must withdraw all assets within ten years following the plan participant’s death.
SECURE 2.0 Act (December 2022)
Individuals born after December 31, 1950, can now defer Required Minimum Distributions (RMDs) until age 73. Those born after December 31, 1958, may defer RMDs until age 75.
Conclusion
Estate and tax laws have undergone substantial changes in recent years. This makes reviewing estate plans created before 2020 particularly important. Consulting with an estate planning attorney about options for using current exemption amounts is advisable.
If you or a loved one needs assistance with elder law, probate or estate planning issues, do not hesitate to contact us to schedule a consultation. We are here to help.
