Today’s year-end planning tip is Estate planning considerations and in particular Special Planning Considerations for Married Couples
So, The federal unified estate and gift tax exemption for 2024 has been at an all-time high of $13.61 million, or $27.22 million per married couple. It will rise next year to $13,990,000 and $27.98 million, respectively. Additionally, the gift tax annual exclusion amount will increase from $18,000 per donee this year to $19,000 in 2025. Regular gifting is a wonderful method of getting money out of your estate for estate tax purposes.
My guess is the Trump administration will eventually EXTEND the tax benefits under the TCJA, but anything can happen in Washington.
On that point, make the MOST of these high exemption amounts TODAY because no one knows what the future holds. At this point in time, these amounts are scheduled to be reduced at the end of 2025 to a pre-2017 levels, which is about half of what they are today. Remember, the future is always uncertain and you should plan accordingly…
Speaking of making the most of your exemption amounts before the end of 2025, here are some planning considerations for Married couples:
- Split Gifts: Both spouses should consider making use of their exclusion amounts before the 2026 decrease.
If neither spouse has used much or any of their exclusion amount, one spouse could make a gift of about $28 million. Then both spouses could make a “split gift” election that, for federal gift tax purposes, would treat the gift as having been made equally by both spouses. Note, though, that this approach does not work efficiently if one spouse has previously used much of their exclusion amount.
- Consider Ownership Changes: If one spouse has a significantly larger percentage of the assets than the other spouse. They might reallocate the assets so that each spouse can take advantage of the exclusion amount. Such changes could result in a significant shift of marital assets between spouses.
- Finally, there are SLATs or Spousal Lifetime Access Trusts: SLATs are irrevocable gifting trusts that move assets and future appreciation outside of one’s taxable estate, but include a spouse as a beneficiary so that the grantor has indirect access to the funds in case they are needed in the future. In order to have SLATs created by spouses for the benefit of the other recognized for gift tax purposes, it is often advised to create them at DIFFERENT times, even in different tax years. Therefore, to complete these prior to the sunset at the end of 2025, you would need to start before the end of 2024.