Client Quick-Hit Alert — New Year, New Estate & Gift Tax Exemptions

New year = new Estate & Gift Tax exemptions and new estate planning opportunities. For example:

• The federal gift & estate tax exemption has increased from $11.7 million in 2021 to $12.06 million in 2022.
• The New York State estate tax exemption has increased from $5.93 million in 2021 to $6.11 million in 2022.
• The Connecticut state gift & estate tax exemption has increased from $7.1 million in 2021 to $9.1 million in 2022.

As of now, the next big shift in the federal estate & gift tax exemption will be at the end of 2025. At that point, the previously enacted tax cuts are scheduled to expire, resetting the federal gift & estate tax exemption of approximately $5.5 million.

However, proposed tax laws could decrease the exemption to a lower amount before the scheduled expiration date.

These new increased exemptions provide tremendous opportunities through the use of effective and efficient estate planning gift strategies such as:

• Dynasty Trusts, which provide generations of protection from creditors’ claims, divorce claims, and future federal estate taxes and state estate taxes
• SLATs (Spousal Lifetime Access Trusts), which protect assets from future estate taxes while retaining those assets for use in your generation before such assets pass to children and grandchildren
• GRATs (Grantor Retained Annuity Trusts), which allow gift tax free transfers of assets to the next generation
• ILITs (Irrevocable Life Insurance Trusts), which protect life insurance proceeds from federal estate taxes and state estate taxes
• CLATs (Charitable Lead Annuity Trusts), which provide for both a charitable income tax deduction and a gift tax efficient transfer of assets to the next generation.

See Client Quick-Hit Alert — New Year, New Estate & Gift Tax Exemptions, Dentons, January 21, 2022.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2022/01/client-quick-hit-alert-new-year-new-estate-gift-tax-exemptions.html