Effective for 2023, the federal estate tax exemption increases to $12.92 million, or $25.84 million for married couples filing joint tax returns. What this means is that individual taxpayers can transfer up to $12.92 million in assets to their heirs (or up to $25.84 million for married couples filing jointly) during life or at death without incurring federal gift and estate taxes. Anything above the excluded amounts would be subject to a 40 percent gift or estate tax rate.
As a word of caution, however, these higher exemptions are set to expire on Dec. 31, 2025, and revert back to their 2017 limits of $5.6 million in 2026.
Without the ability to know what Congress and shifting political priorities will occur over the next two years, high-net-worth families would be wise to plan appropriately under the guidance of experienced financial advisors and tax consultants to maximize the effective use of the increased exemptions during the interval of time it is available. This would also include maximizing annual gifts to trusts or taking advantage of an inflation-adjusted increase in the annual gift tax exclusion that allows individuals to transfer of up to $17,000 per year to as many people as they choose free of gift taxes. For married couples filing joint returns, the transfer tax exclusion is $34,000 per beneficiary. These gifts effectively transfer assets out of an individual’s taxable estate to family members or other named beneficiaries and allow grantors to use trust assets to fund life insurance policies or, in some instances, pay income tax liabilities while they are alive.
About the Author: Lee F. Hediger is a co-founding director and chief compliance officer with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. He can be reached at the firm’s Ft. Lauderdale, Fla., office at (954) 712-8888 or via email email@example.com.
Lee F. Hediger is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.
Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
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Updated on February 15, 2023