The estate tax exclusion has increased to $12.06 million. This is the amount one person can pass gift and estate tax free during their life or upon death. With proper trust provisions, a married couple could pass $24.12 million.
The annual amount that can be gifted each year without reporting is now $16,000 for an individual and $32,000 for a married couple.
These changes were instituted by the IRS pursuant to the federal law enacted in 2017. However, the estate tax law is set to expire in 2025. If Congress does not extend the estate tax law, the amount of the estate tax exclusion could revert back to under $6 million. There are pending bills which would decrease the estate tax exclusion even more than the prior federal law.
Sharon Ravenscroft recommends to her clients that if assets, including life insurance as well as IRAs and other qualified retirement accounts, might exceed $3 million, then a client really wants to have the estate plan reviewed to see if there are any strategies needed to be applied before 2025.
The new federal exclusion does not change the need for a trust to avoid probate. A trust is still very helpful to limit the expense related to administering the assets of a decedent, to avoid notice to family members who should be involved, or to avoid the need for court involvement when minors are receiving assets. Corporate stock and LLC ownership should be held in a trust in order to assure smooth business operations.