The official estate and gift tax exemption will climb to $12.06 million per individual for 2022 deaths, up from $11.7 million in 2021, according to new Internal Revenue Service inflation-adjusted numbers. And the gift tax annual exclusion amount will increase to $16,000 for 2022, up from $15,000 where it’s been for the last four year. 

Elderly woman with her daughter.What does this mean? In 2022, an individual can leave $12.06 million to heirs and pay no federal estate or gift tax, while a married couple can shield $24.12 million with proper planning. For a couple who already maxed out lifetime gifts, the new higher exemption means that there’s room for them to give away another $720,000 in 2022.

The estate tax is assessed at 40% on the biggest estates. By transferring wealth to heirs early, the wealthy can avoid the estate tax. They do so by making big gifts—typically in the millions that eat up the $12.06 million exemption amount—and by making lots of $16,000 annual exclusion gifts each year that don’t count against the $12 million. You also can make unlimited direct payments for medical and tuition expenses for as many people as you’d like, with no gift or estate tax consequences. 

BUT STAY TUNED… under the current law the estate tax exclusion limit will automatically sunset back down to $5 million per person in 2026. However, we could see a reduction in the estate tax exclusion to $5 million as early as next year, given pending legislation. These are uncertain times in estate and gift tax planning. If you are thinking of making a large gift for this year, you need to act soon. In any case, even if you do not have an estate of $5 million, you need to check that your estate plan documents are up to date: a will and/or trust, durable financial powers of attorney, and medical directives (health care power of attorney, mental health power of attorney, living will, and medical release).

If you have questions about how the current and potential changes in estate and gift tax limits will impact you or your heirs, or just want to be sure your estate plan documents are up to date to achieve your goals, call or email our office to schedule your complimentary estate planning consultation. 480-922-1010 or info@bivenslaw.com  

– Stephanie A. Bivens, Esq. CELA