Federal Gift and Estate Tax Law 2022

Federal Gift/Estate Tax Exemption

Want to know the basics of Estate and Gift Tax? Below is a review of the current federal gift and estate tax law.

In 2022, the Federal Gift and Estate Tax Exemption increased to $12.06 million per individual and $24.12 million for a married couple.  This has increased from $11.7 million in the previous year.  This means that you can give away during your lifetime and/or leave an estate up to $12.06 million without owing any federal gift or estate tax.  This law is expected to sunset in 2025 and go down to about $5-6 million.  There is currently no California estate tax.

Annual Gift Tax Exclusion

The Gift Tax is tied to the estate tax.  The annual Gift Tax exclusion for 2022 has increased to $16,000, up from $15,000.  Any individual can gift away this amount to another individual annually without the need to file a gift tax return and without counting towards their lifetime gift and estate exemption of $12.06 million.  Tax rates range from 18% to 40% on anything exceeding the lifetime exemption amount.

Generation-Skipping Transfer Tax

The Generation-Skipping Transfer Tax (GST Tax) is a similar but separate lifetime exemption.  In 2022, it has also increased to $12.06 million per individual, up from $11.07 million.  This is a complex tax.  Generally speaking, any lifetime gift or post-death transfer made to an individual that is more than one generation removed from you (i.e. your grandchild) is counted against your lifetime GST Tax exemption and is separate from the lifetime gift and estate tax exemption from the above.

For example, if you give your granddaughter $100,000 this year, $100k is counted towards your lifetime GST Tax exemption, AND $84,000 is counted towards your lifetime gift and estate tax exemption ($100,000 - $16,000 annual Gift Tax exclusion).  A flat 40% tax is imposed on anything over the GST Tax exemption.

If you have a large estate, it is wise to speak to an estate planning attorney and a CPA to determine what is best for your situation, as estate tax laws change. You can schedule your FREE consultation NOW with our estate planning team who can give you all the information you need to make an educated choice and maximize the protection of your family.  If you have any questions or would like more information, please give us a call at (855) 219-3333.

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