FEDERAL GIFT AND ESTATE TAX AMOUNTS

Estate and Gift Tax Exemption:  

The federal estate and gift tax exemption is set at $12.92 million for 2023. The federal estate and gift tax exemption is set to increase on January 1, 2024, to $13.61 million. Any excess amount of the estate is subject to a flat tax rate of 40%.

The annual gift tax exclusion for 2023 is currently $17,000 per donor per donee. The annual gift tax exclusion is set to increase January 1, 2024, to $18,000 per donor per donee. If total gifts to a donee are the annual gift tax exclusion amount, no gift tax return is required, and the amount does not reduce the donor’s estate and gift tax exemption. Keep in mind that qualified gifts for tuition and medical bills, if paid directly to the educational or medical institution, do not count against the annual gift tax exclusion or the lifetime estate and gift tax exemption.

Generation-Skipping 

The “GST” exemption will remain the same as the federal estate and gift tax exemption, or $12.92 million for 2023, and $13.61 million for 2024.

Reminder: The federal estate, gift, and generation-skipping tax exemptions are based on the 2018 Tax Act, and are currently set to sunset on December 31, 2025. In other words, the exemptions will return to pre-2018 levels on January 1, 2026. With this in mind, and presuming a client can afford to make gifts in excess of the pre-2018 limit, such clients may want to consider making gifts that utilize these higher exemptions, particularly because any unused exemption will “disappear.” In other words, a donor will need to make a gift above the pre-2018 tax level (i.e., $5.5 million indexed for inflation) to utilize the “disappearing” exemption amount. It is estimated that the inflation-adjusted exemption amount for 2026, if the law does not change, will be approximately $6.4 million. 

Required Minimum Distributions on Inherited Retirement Accounts:  

In 2020, the SECURE Act created a 10-year payout rule for inherited retirement assets by a non-spouse beneficiary instead of such beneficiary’s life expectancy (the life expectancy method is still available to a spousal beneficiary), such that the account must be fully withdrawn within 10 years after the death of the plan participant. It was commonly interpreted that withdrawal of required minimum distributions (“RMDs”) would not be required during that 10-year period. In 2022 the SECURE ACT 2.0 was released, stating that RMDs on inherited retirement accounts shall be required at a minimum, to be distributed in equal installments over the 10-year payout period. However, the SECURE ACT 2.0 clarifies that the IRS would not penalize beneficiaries for not taking RMDs in 2021 or 2022 because of the common misinterpretation. If you feel as though you may have missed a required minimum distribution, please further discuss the issue with your CPA and/or financial advisor. 

The Oregon Estate Tax Exemption 

remains at $1 million with any excess amount subject to a marginal tax rate of 10-16% for 2023 and beyond.  The Oregon exemption is not indexed for inflation.

The Washington Estate Tax Exemption

for 2023 remains at $2.193 million, with any excess subject to a marginal tax rate of 10-20% for 2023 and beyond. 

Recall that neither Oregon nor Washington has a gift tax. As such, gifts made during life do not reduce the Oregon and Washington estate tax exemptions.

Welcome Bend Clients

In October 2022, we opened a new office in Bend, Oregon. It houses three of our Estate Planning attorneys—Tom Sayeg, Brent Kinkade, and Annie Nelson. They are supported by a staff of five legal assistants and an administrative assistant. We are excited to welcome all our new Central Oregon clients to Saalfeld Griggs, and we look forward to continually serving you in 2024.