As we start 2024, changes are on the way for estate taxes. These changes have a big effect on your loved ones future. In this blog, we will explain the upcoming changes in federal estate taxes, highlighting the key numbers, discuss methods for advanced tax planning, and the stress the importance of staying up to date as the law changes.
Understanding Federal Estate Taxes:
First, let’s clarify the concept of federal estate taxes. Additionally known as “death taxes,” these are taxes established by the federal government that must be paid by your loved ones on the transfer of assets when you pass away.The exempted amount you can pass on to your loved ones without paying taxes, has been slowly rising. In 2023, it stood at $12.92 million and is set to increase to $13.44 million in 2024.
Implications for Estate Planning:
For people with large real estate assets, especially in metropolitan areas like Los Angeles, the new limit of $13.44 million is important. Which means the amount you can transfer to your loved ones without them paying taxes, both during your lifetime and at the time of your death, is $13.44 million. If you are a married couple, this exemption basically doubles, allowing for a combined transfer of $26.88 million.
The Looming Changes in 2025:
The current estate tax law is set to expire on December 31, 2025. If Congress does not pass a new law, the exemption amount will return to approximately five to seven million dollars, a big drop from the 2024 threshold. This drastic change highlights the importance of staying well-informed of legislative developments and engaging in advanced tax planning.
Act Now: Advanced Tax Planni ng and Consultation:
Given the uncertainty surrounding the future of estate tax laws in the coming 2 years, it’s important for individuals with assets nearing the $13.44 million verge to consult with an advanced tax planning attorney. Such professionals can provide custom guidance to secure your assets for future generations and minimize the tax effects for your heirs. Acting promptly is important, as the current exemption amount may not continue beyond 2025.
Gift Tax Exemption Increase:
In addition to changes in estate taxes, the gift tax exemption amount is also going to increase slightly in 2024. Individuals will now be allowed to gift up to $18,000 per year without filing a gift tax return. This provides an opportunity to transfer wealth to family members. This can include children, grandchildren, and their spouses, without the need for IRS notification.
As we conclude, individuals with large estates must navigate the changes in federal estate taxes. Proactive engagement in advanced tax planning and consultation with knowledgeable professionals can make a significant difference in securing your assets. Stay informed, act clearly, and ensure that your loved ones inherit your legacy without the burden of excessive taxes.
