The underlying laws governing gift and estate taxes did not change, but the amounts that can be given away are indexed for inflation and have increased greatly.
Q: How have the gift and estate tax laws changed in 2024?
A: The underlying laws did not change, but the dollar amounts that can be given away are indexed for inflation and have increased greatly since last year.
The exemption from gift and estate taxes is now just above $13.6 million, up from about $12.9 million last year. This is the dollar amount of taxable gifts that each person can make while living or at death. Any amounts given away above the $13.6 million amount would be taxed at 40%.
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A married couple gets two of the $13.6 million exemptions, so together they can give away $27.2 million.
The annual exclusion from the gift tax increased to $18,000 as well. This amount is $1,000 greater than the exclusion in 2023 (which was also $1,000 greater than the amount in 2022). The $18,000 amount is how much each person can give to any other person each year without the gift being treated as a taxable gift. For a married couple, the exclusion doubles to $36,000.
If a person gives another person more than $18,000, then the excess value of the gift begins to use up the $13.6 million lifetime exemption mentioned above.
In 2025, the estate and gift tax exemptions will increase again, with the amount of the increate dependent on the level of inflation during 2024. But in 2026, unless the federal estate tax laws are modified, the exemption from gift and estate taxes is going to revert to the exemption which was available in 2017. Adjusted for inflation, the exemption should be approximately $7 million per person.
Q: While living in California, my wife and I paid for a simple living trust. We recently moved to Texas and put our new home and bank accounts into the name of the trust. Do we need to pay to have the trust updated to reflect our relocation to Texas? Also, if we want to make minor revisions to the trust, must we pay to have that done or can we simply update it ourselves?
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A: The trust should be reviewed by a Texas attorney, preferably an attorney who specializes in estate planning. You could try to make minor changes yourself, but you run the risk of really messing things up. You might save yourselves a little money now, but cause tens or hundreds of thousands of dollars in legal fees and other litigation costs after your deaths.
Importantly, it’s not just your living trust that should be reviewed. You no doubt have California wills, powers of attorney and advance directives, all of which should be converted to the Texas versions we use here. Probating a California will is possible, but it can make the probate process take longer and cost more.
Banks, brokerage houses and other businesses (including hospitals) like to see Texas powers of attorney and medical documents. They also much prefer to see recently executed ones. Because it has been seven years since you signed the California documents, and also because they are not the Texas forms, they should all be replaced with new documents.
The information in this column is intended to provide a general understanding of the law, not legal advice. Ronald Lipman of the Houston law firm Lipman & Associates is board-certified in estate planning and probate law by the Texas Board of Legal Specialization. Email questions to: stateyourcase@lipmanpc.com.
Changes to gift and estate rules coming in 2024
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02.01.2024
The underlying laws governing gift and estate taxes did not change, but the amounts that can be given away are indexed for inflation and have increased greatly.
Q: How have the gift and estate tax laws changed in 2024?
A: The underlying laws did not change, but the dollar amounts that can be given away are indexed for inflation and have increased greatly since last year.
The exemption from gift and estate taxes is now just above $13.6 million, up from about $12.9 million last year. This is the dollar amount of taxable gifts that each person can make while living or at death. Any amounts given away above the $13.6 million amount would be taxed at 40%.
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A married couple gets two of the $13.6 million exemptions, so together they can give away $27.2 million.
The annual exclusion from the gift tax........
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