Estate Planning and Administration Alert:
Gift Planning in 2022
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Each year, the IRS considers inflationary adjustments to the estate and gift tax exemption amount and gift tax annual exclusion amount. As you consider estate planning or making gifts during the new year, here are the numbers that were published for 2022:
2022 Exemptions and Exclusions. The estate and gift tax exemption amount has increased from $11.7 million per person in 2021 to $12.06 million per person in 2022. Clients who have previously fully used their exemptions can now make gifts of an additional $360,000 over the annual gifts discussed below. The 2022 generation-skipping transfer tax (GST tax) exemption amount has also increased to $12.06 million per person. However, if no action is taken by Congress to change the current law prior to December 31, 2025, these heightened exemption amounts will revert to pre-2017 Tax Act levels of $5 million per person (as upwardly adjusted for inflation) on January 1, 2026. Projections show that the exemption would be approximately $6.5 million per person at that time, though the current inflationary trends could push that number higher.. The current high exemptions provide an excellent opportunity for planning lifetime transfers to minimize total taxes for clients whose estates are larger than $6.5 million. Gifts also continue to be advisable for clients in Washington and Oregon where we have a state estate tax, but the tradeoffs should be considered.
Annual Gifts. Every year, each person is allowed to make a gift to another person up to a certain amount without incurring any gift tax liability – this is known as the “annual exclusion.” The annual exclusion is a powerful tax saving tool because the person making the gift can transfer wealth without using any of the estate and gift exemption amount and without needing to file a gift tax return. After many years of the annual exclusion being $15,000, the IRS has increased the annual exclusion to $16,000. This means that a donor can give up to $16,000 to an unlimited number of persons without incurring gift tax or the obligation to file a gift tax return. For example, married couples can give each child and grandchild up to $32,000 in 2022 without incurring any gift tax liability, without using any estate or gift tax exemption, and without needing to file a gift tax return.
Planning Opportunities. Current factors, such as depreciated asset values resulting from the COVID-19 pandemic, still low interest rates, and historically high estate and gift tax exemption amounts, provide unique opportunities to minimize your and your family’s tax exposure. In addition, taking advantage of the higher exemption amounts now, particularly for individuals with an anticipated gross estate in excess of $6.5 million and couples with a combined estate over $13 million, should also be considered.
As we march through 2022, let’s start the conversation about tax-saving estate planning techniques that are available to you. Please contact one of our attorneys to explore planning opportunities, especially if you are considering making lifetime gifts.
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Dean Sandow assists business owners, executives, professionals, families, family enterprises, and individuals plan for all stages of business and life, with an emphasis on creative use of entities, trusts, and planning techniques to maximize efficiency and tax savings and minimize administration. With a keen understanding of entity structure and management, Dean creates plans to enhance and manage assets for the client and for next generation or beyond.
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Steve Bennett helps create estate plans tailored to client objectives, and reviews existing estate plans to ensure they are up-to-date with state and federal tax laws, applicable state laws, and evolving family structures and goals. He represents singles and couples (and particularly high net-worth clients) in the preparation of wills and trusts, complex estate analysis, probate and estate administration, estate and income tax planning, asset transfers and ownership analysis, estate and trust dispute resolution, and business succession planning.
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Brian Jolly's law practice focuses on corporate and general business matters, as well as estate and succession planning. With more than a decade of experience representing families, closely-held businesses, and non profit organizations, Brian brings considerable working knowledge in the areas of business formation, mergers and acquisitions, and internal and external disputes in a multitude of business and estate planning matters.
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Melissa Chapman practices in a variety of areas including estate planning and administration, commercial and estate litigation, business and real estate law. She is a skilled communicator and advocate for her clients, providing sound and practical guidance at each state of the case. Melissa specializes in probate and trust administration and related litigation, estate planning, and conservatorships and guardianships.
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Margot Seitz is a compassionate attorney who enjoys helping her clients navigate through the complex world of estate planning and administration. In her estate planning practice, Margot specializes in probate, trust administration, conservatorships, and elder abuse litigation. Margot works closely with clients to make sure that their needs and wishes come first, regardless of whether she is preparing a will or assisting a client after the death of a loved one. Margot has also developed a specialty in handling creditor disputes in the context of estate administration.
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Megan Oshiro supports the firm's business, estate and succession planning, financial services and real estate practices. Megan's internship at Willamette's Business Law Clinic, Oregon DOJ in the Financial Fraud and Consumer Protection Section, and externship with the Adidas in-house counsel in Portland bring excellent skills and working knowledge to her practice.
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Copyright © 2022 Farleigh Wada Witt. All Rights Reserved.
The contents of this publication are intended for general information only and should not be construed as legal advice or opinion on specific facts and circumstances.
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