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Home » Estate Planning » 2022 Estate Tax Exclusion Has Been Set

2022 Estate Tax Exclusion Has Been Set

December 6, 2021 by Pamela Potter

estate taxThe federal estate tax is not a factor for most people because there is an exclusion that is pretty high relative to most estates. This is a set amount that can be transferred tax-free — the tax is only levied on any portion of an estate that exceeds it.

There are annual adjustments to account for inflation, and we have experienced a significant level of inflation this year. The 2022 exclusion amount has been announced, and we will take a look at it here.

2022 Federal Estate Tax Exclusion

For the rest of 2021, the exclusion is $11.7 million. This figure came about because of the enactment of the Tax Cuts and Jobs Act in December of 2017. The exclusion had been $5 million adjusted for inflation since 2011, and it was doubled through a provision in this act.

An inflation adjustment resulted in $11.18 million exclusion for 2018, and it has risen incrementally since then. The IRS has announced the adjustment for 2022, and it will exceed $12 million for the first time. It will be $12.06 million when the new year rolls around.

The top rate of this tax is 40 percent so the tax is a very big deal for those who are exposed.

As long as you are married to an American citizen, you can transfer any amount of property to your spouse tax-free because there is an unlimited marital deduction. A surviving spouse can keep his or her deceased spouse’s exclusion so they the surviving spouse’s estate can use it at the surviving spouse’s death.

Gift Tax Exemption Increase

A federal gift tax was put into place in 1924, and it was repealed in 1926, but it was reenacted for good in 1932. The two taxes are unified under the tax code so the multimillion-dollar exclusion applies to taxable gifts and your estate.

You cannot give away all of your estate tax-free while you are living to get around the estate tax, but there is some latitude. There is a separate annual gift tax exemption that can be used to give gifts to others tax-free manner without using any portion of the unified exclusion.

Since 2018, the annual gift tax exemption has been $15,000 per person, but it is going up to $16,000 next year.

The Clock Is Ticking

From an estate planning perspective, these are the best of times for people that have accumulated a great deal of wealth, but things are about to change. The provision in the Tax Cuts and Jobs Act that set the exclusion at over $11 million will sunset or expire on January 1,  2026.

In 2017 when the measure was passed, the exclusion was $5.49 million, and it will return to this level indexed for inflation upon the expiration of the provision (if Congress doesn’t change the law first). When you put all this together, you can see that time is of the essence.

The record high exclusion can be used to give gifts or fund certain types of trusts at some point during the next few years before the exclusion plummets.

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You are making the right connection to obtain information about estate planning and nursing home asset protection. We update this blog all the time so there is always fresh information to absorb, and there are other written materials that you can access free of charge.

One of our most valuable resources is our estate planning worksheet. You will come away with a great deal of useful information if you go through it, and you can gain access right now if you visit our worksheet download page.

Are You Ready to Act?

If you are on this site because you are ready to work with an Ashland, Kentucky estate planning lawyer to put a plan in place, we can help. You can schedule a consultation if you call us at 606-324-5516; the number for our Florence, Kentucky office is (859) 372-6655.

Our Charlotte, NC  and Huntersville, NC locations can be reached at 704-944-3245, and you can use our contact form to send us a message.

 

  • Author
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Pamela Potter
Pamela Potter
Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.
Pamela Potter
Latest posts by Pamela Potter (see all)
  • 2022 Estate Tax Exclusion Has Been Set - December 6, 2021
  • An Overview of 2022 Medicare Cost Increases - November 24, 2021
  • Elder Financial Abuse Is a Looming Threat - November 22, 2021

Filed Under: Estate Planning Tagged With: 2022 estate tax exclusion, 2022 gift tax exclusion

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About Pamela Potter

Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.

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