IRS Announces Increased Gift And Estate Tax Exemption For 2024
If you’re an individual and family in Nevada looking to protect your assets and your estate as you age, the tax laws have changed. The US Internal Revenue Service (IRS) recently announced an increased gift and estate tax exemption for 2024. This change was influenced largely by the recent economy and inflation, presenting new opportunities and considerations for estate planning strategies.
The Rise in Annual Gift Tax Exclusion
Beginning in 2024, the annual gift tax exclusion will increase to $18,000 per recipient. This is the highest exclusion amount to date, offering Nevadans an enhanced opportunity to transfer wealth to beneficiaries tax-free.
Nevada individuals can now give their loved ones up to $18,000 a year without using any lifetime gift and estate tax exemptions. This means married couples can give away $36,000 a year per recipient beginning next year.
This is especially helpful for couples looking to “spend down” their assets, a strategy often employed for various reasons, including estate planning, tax management, or qualifying for certain benefits like Medicaid. By spending down their assets through these tax-free gifts, couples can ensure that a larger portion of their wealth goes directly to their loved ones rather than taxes.
The lifetime estate and gift tax exemption will also increase in 2024 to $13.61 million per individual. For married couples in Nevada, the combined gift and estate tax exemption will also substantially increase to $27.22 million in 2024. This enhancement allows couples to protect a significant portion of their estate from federal estate or gift tax, offering a strategic advantage in estate planning.
Considerations for Non-US Citizen Spouses
A notable change in 2024 is the increase in the amount one can gift to a non-US citizen spouse, now set at $185,000. This update is particularly relevant for Nevada’s diverse population, addressing the unique challenges faced when one spouse is not a US citizen and balancing international tax considerations.
Impact of Exemption Changes on Existing Estate Plans
The increased exemption amounts ($18,000 for the annual gift tax exclusion and $13.61 million for the lifetime estate and gift tax exemption) may alter the dynamics of many existing estate plans. Plans structured around the previous limits might now be less tax-efficient or could miss out on new opportunities for wealth transfer.
For those who have incorporated gifting as a part of their estate planning, the new exemptions offer a chance to increase annual tax-free gifts. This might mean adjusting how much is gifted to individuals each year or rethinking which assets are best suited for gifting under the new thresholds.
With the increased exemption amounts, reviewing and possibly revising existing trusts may be advantageous. For instance, strategies like credit shelter trusts that optimize estate tax exemptions may need adjustments to maximize the benefits under the new rules.
The new exemptions may also affect strategies for long-term care planning, particularly for those considering spending down assets to qualify for Medicaid or other programs.
An Estate Planning Attorney Can Help
While the exemption amounts will increase in 2024, this amount will be decreased to $5 million per individual beginning January 1, 2026. This means that now is the best time to act if you wish to take advantage of the new estate and gift tax exemptions before they decrease.
An estate planning lawyer at our law firm can help couples navigate complex tax laws to maximize the tax efficiency of their wealth transfer. By leveraging the annual gift tax exclusion and other estate planning tools, our estate planning attorneys can ensure that a larger portion of your wealth is passed on to your loved ones, minimizing the portion consumed by taxes. This is especially important for estates subject to federal or state estate taxes.
Spending down assets through gifts is just one aspect of a comprehensive estate plan. An estate planning lawyer ensures this strategy integrates seamlessly with other plan components, such as wills, trusts, healthcare directives, and power of attorney.
John Park is a highly experienced attorney in estate planning, probate, business law and guardianship to help people organize the elements of their lives through careful estate planning and asset protection measures.