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Estate and Gift Tax Exemption and Exclusion to Increase in 2023


This will be the last informational newsletter that we circulate to all of our clients and colleagues. Going forward, these newsletters will be delivered only to participants in our new Client Care Program, to keep them updated regarding the latest changes in the law that might affect their plans.


As you may know, we have recently begun to roll out our Client Care Program, as part of our ongoing commitment to serve as trusted, lifelong advisors to our clients and their families, and to deliver the highest level of service and a quantum leap in value. This unique program is our firm’s way of diligently and proactively managing our clients’ estate plans to ensure that they function properly and meet their objectives at all times. This ongoing process will avoid the unnecessary taxes, family disputes and diminished legacies that inevitably result from an outdated or improperly administered estate plan. If you are a client of the firm, and we have not yet reached out to you directly, we will be contacting you shortly with details about your own tailored Client Care Program.


That being said, we do want to offer this final, important update to all of our clients and colleagues regarding expected increases in the lifetime federal estate and gift tax exemption amount and annual exclusion amount. The lifetime federal estate and gift tax exemption is the amount of wealth that an individual can shelter from estate tax on transfers made during their lifetime or at their death. Lifetime gifts in excess of the gift tax annual exclusion amount ($16,000 in 2022, as described below) will reduce the available exemption amount. The current exemption amount in 2022 is $12.06 million for an individual ($24.12 million for a married couple.) In 2023, the new exemption amount is set to be $12.92 million for an individual person ($25.84 million for a married couple.) This substantial increase presents an opportunity for individuals or families to transfer additional wealth and shelter assets from estate taxes.


It is important to note that this lifetime exemption amount is set to sunset at the end of 2025. If no legislative action is taken, the exemption amount will be reduced to $5 million for an individual ($10 million for a married couple), indexed to inflation. Currently, if no tax law changes are implemented before January 1, 2026, we estimate that the unified exemption amount will be in the mid to high $6 million range per individual.


The gift tax annual exclusion allows an individual to gift a certain amount to any number of recipients each year, without incurring gift tax consequences or using any of the individual’s lifetime exemption amount. In 2022, the annual exclusion amount was $16,000 for an individual ($32,000 for a married couple choosing to split gifts.) For 2023, the annual exclusion amount is estimated to increase to $17,000 for an individual ($34,000 for a married couple choosing to split gifts.) For example, it is anticipated that a married couple with four children will be able to gift $136,000 ($34,000 to each child) in 2023, without using any of their lifetime exemption amounts. All of these funds would also be excluded from the couple’s estates for estate tax purposes.

In light of these anticipated increases in the lifetime exemption and annual exclusion amounts, and given the potentially limited opportunity to transfer significant wealth before the end of 2025, our existing and prospective clients should contact us to finalize any 2022 gifting under current exemption amounts and determine if additional gifting in 2023 would be advantageous.