The IRS adjusts estate tax rates year-to-year, and for those planning to maximize the value of their estate, staying informed about those changes with the guidance of estate planning professionals in your area is a great way to stay well informed going forward.

Smaller estates don’t need to file an estate tax return with the IRS, but for wealthier Georgians, the threshold at which it becomes a requirement changes annually. For 2022, an estate tax return must be filed on those with a combined gross asset and prior taxable gift total of $12.06 million or more. The amount is adjusted for inflation each year, and the IRS has recently raised the Federal 2023 Estate Tax Exemption to $12.92 million, $860,000 more than the 2022 estate tax. For married couples, that shields up to $25.84 million from federal estate tax in 2023. 

The changes will affect gift tax exemptions and have other tax implications and opportunities that Georgians will want to be aware of when it comes to creating, updating, and protecting their legacy in 2023.

What the Increases Mean for Federal Gift Tax in 2023

The updated estate tax exemption for 2023 increases the federal gift tax exemption to $17,000 annually. Married couples can gift $34,000 annually to their heirs. For those choosing lifetime gifting distribution, taxpayers can increase the amount by an additional $860,000 in tax-free gifting, while married couples can give a combined $1.72 million.

Revisiting your Estate Plan to Address the Changing Gift Tax Rates

Though many investments have experienced a decline in their value over the year, with an expected recovery in their value over the long term, it may be beneficial to update gifting considerations as the holiday season and year’s end approaches.

Though political climate often impacts federal-level changes to taxes and wealth distribution, it’s pragmatic to be prepared for this exemption to end in 2026, when the existing legislation is expected to revert to the prior exemption rate of $5.49 million, adjusted for inflation. However, The IRS has indicated that those taking advantage of the existing rates through 2025 will not be impacted when rates return. That means making large gifts now won’t harm your estate’s value with lower future rates. It’s essential to stay informed of existing and future adjustments to Federal tax regulations and work with an estate planning professional who can advise you on the best way to protect your legacy.

Every estate is unique, and we recommend those looking to maximize the value their heirs stand to gain seek customized advice from both financial and legal advisors in their area.

Estate Planning and Tax Guidance from Legal Experts

Estate planning is complex, and it becomes increasingly so when addressing tax implications from federal estate and gift tax regulations. The team at Smith Barid offers their expertise to those looking to maximize the value of their estate and protect it for future generations. We can help prepare you to make practical decisions now, and as future implications require some updates to your estate plan. Contact us today to schedule a consultation and receive expert guidance from a team committed to helping Georgians maximize the value of their estate.