With 2023 just starting, there are many things to look out for with regards to estate planning. In particular, it's important to keep up with the amount being exempt for estate and gift taxes, as it could possibly affect how much your family will actually keep from their inheritance if you own over a certain amount. Now that we have officially started this new year, the IRS has released these numbers to the public, and I will now be sharing them with you.
For 2023, the lifetime estate and gift tax exemption is $12.92 million per person. Married couples can use portability, meaning that they can combine their exemptions, resulting in a total exemption of 25.84 million per married couple.
Very few people have a federal estate problem with these high numbers. However, if Congress does not change the law, the exemption will revert to its pre-Trump Tax Cuts and Jobs Act level of $5 million per person, indexed to inflation, on January 1, 2026. So, with inflation in mind, that may result in an effective 6 million per person or so, with a portability of about 12 million for married couples. Many people may not have an estate tax problem even after the exemption is cut in half, but a small number will. Fortunately, for Georgia residents, the state does not have an estate tax.
What about gift taxes, like giving money to people this year while you're alive?
The annual gift tax exclusion amount increased by $1,000 this year, making it $17,000. That means that you can give any recipient up to $17,000 this year without any gift tax implications. If you are married, your spouse can do that too. You can give more than $17,000, but you may then need to pay a gift tax or file forms with the IRS to offset that additional amount against your lifetime estate and gift tax exemption.
The bottom line is that if you did not have an estate tax issue in 2022, odds are that you won't in 2023 either. But remember that tax planning is only a portion of your overall estate plan. If you've done estate planning, be sure to review it annually and consult your attorney every 3 years for a checkup.
If you haven't done any planning of your own, then you're relying on the government's plan for you and your family, and, if you own a business, for your business as well, and you might not like how they decide to pass along your assets. So, make 2023 the year to get your own plan in place. If you're a business owner, make sure 2023 is the year you get your business protected so that, if something happens to you, the business can still operate and won't end up in probate court. We help businesses plan for those "what if" situations and give owners peace of mind knowing their business can continue to operate even during the worst-case scenario.