Estate & Gift Tax Planning 2022 Review

As indicated above, the recent changes to congressional control following the mid-term elections will likely mean a stalemate in Congress for the next 2 years with respect to any meaningful tax legislation. This means that from an estate planning perspective, the increased lifetime exemptions enacted as part of TCJA will continue to be available for transfers of assets out of your estate. Due to the current high inflation rates, the lifetime exemption will see a significant increase going into 2023, resulting in almost $2 million additional exemption for married couples filing jointly. For those that have already employed estate transfer techniques, additional gifting or transfers may be available to use up the added exemption, such as gifting or freeze planning to gift trusts with spousal lifetime access provisions (“SLAT”).  Similarly, some of you may require structuring a more complicated gifting structure to maximize your wealth transfer at year-end.  Gifting LLC interests, closely held business interests, or restricted assets can be more powerful based on how these assets are valued.  For instance, gifting non-transferrable, non-controlling interests are significantly less valuable than gifting assets directly and therefore use up less of your lifetime exemption.  As a result, a taxpayer can better leverage their lifetime exemption by gifting discounted interests in a holding company that directly owns assets rather than gifting the asset.   While limiting these discounts have repeatedly been a target in D.C., it remains to be seen if or when legislation may actually get passed that limits such discounting of an estate’s assets under these methods, so these techniques remain currently available for use.  Finally, as the great migration of baby boomers to warmer and lower taxing states continues to increase, all estate plans should carefully identify residence/domicile for state estate/inheritance tax purposes prior to any relocation you may be considering. 

  1. Increase of Annual Exclusion and Estate & Gift Exclusion Amounts

The IRS released the 2023 annual exclusion gifting amount and lifetime exclusion amounts. In 2022, taxpayers may gift, free of gift or estate tax, up to $16,000 per person. The annual exclusion amount will increase to $17,000 in 2023:

Annual Gifting Exclusion


If able, a taxpayer should utilize this annual exclusion prior to year-end, which is available on a use it or lose it basis each year.  Moreover, thoughtful consideration should be undertaken in deciding which assets to gift.  For example, gifting appreciable assets removes the current asset as well as future  appreciation and generally produces more favorable transfer tax savings benefits then gifting cash.  Finally, the annual exclusion for qualified medical or educational payments is unlimited.  However, it is important to note that gifts to the popular section 529 plans do not qualify for the unlimited annual exclusion.  It is important to note there is a special 529 gift election available where the taxpayer may pay up to five times the annual exclusion amounts into these accounts free of gift tax and without using any of their exemption amount.

Lifetime Estate & Gift Tax Exclusions

 Type of Tax2022 Rate2022 Exemption2023 Rate2023 Exemption
Gift40%$12.06 million40%$12.92 million
Estate 40% $12.06 million 40% $12.92 million  
GST40%$12.06 million40%$12.92 million

The Basic Exclusion Amount (i.e., lifetime exemption) is a unified exclusion amount for gift tax and estate tax that a taxpayer may gift during lifetime and/or own at death without being subject to gift or estate taxation. The Generation Skipping Trust (“GST”) tax also provides for a similar amount of exclusion. The TCJA increased this exemption beginning in 2018 from $5.59 million to $11.18 million and for 2023, after indexing for inflation, this exclusion amount will be $12.92 million for each individual or $25.84 million for married couples. Such exclusion is scheduled to be reduced back to pre-TCJA levels, adjusted for inflation, at the end of 2025, when it is currently expected to be around $6.4 million per person.

Want to Join Our Team?

We are always looking to add exceptional people to Team DB.