Gift and Estate Tax Exclusions - 2022

The IRS has published the exemption amounts for estate and gift taxes for 2022. These figures are adjusted annually for cost-of-living increases. The estate of a person dying between Jan. 1 and Dec. 31, 2022, will have an exclusion amount of $12,060,000. In addition, a surviving spouse may also elect to use any unused portion of their deceased spouse’s exclusion amount (called “portability”), essentially doubling the potential exclusion of a married couple. The lifetime gift tax exemption for 2022 is also $12,060,000.

In addition, the IRS increased the annual gift tax amount from $15,000 to $16,000 for 2022. This means that taxpayers can gift $16,000, per recipient, tax free. Married couples may double the gift amount to $32,000 per recipient.

These 8-figure exclusion amounts mean that only a very small percentage of estates are taxed at the federal level. And fortunately for Tennesseans, there are no inheritance or gift taxes. The Tennessee gift tax was repealed in 2012 and the Tennessee inheritance tax was phased out and eliminated in 2016. However, it is a good idea to continue to keep an eye on potential legislative changes. For example, the current estate tax exclusion amounts are set to expire at the end of 2025 (and revert to lower pre-2017 amounts) but could change sooner.

If your estate plan contains special trusts designed to avoid estate taxes, you may want to revisit whether you want to keep them in place. However, trusts can be used for more than just tax planning. They help keep assets in the family, preserve property for children of a prior marriage, supplement public benefits, particularly for beneficiaries with special needs, and assist with asset protection from creditors or in a divorce and other litigation. Also, a living revocable trust may be useful for avoiding probate.

If you have any questions about estate, gift and inheritance taxes and their potential effect on your estate plan, please contact us.