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Changes in estate planning for 2022

On Behalf of | Feb 14, 2022 | Estate Planning |

Sometimes, the government makes changes that affect estate planning. It’s important to stay up to date on those changes, because if you don’t, you could miss out on the benefits that they could provide to you as you work to minimize the risk of taxation in the future or focus on passing on assets.

If you like to use the gift tax exemption to help reduce the value of your estate and pass on assets to your loved ones, then you should know that the exemption is growing in 2022. For 2022, the amount you will be able to gift without using a gift tax form will be $16,000. That’s the first increase that has happened since 2018 when it was changed to $15,000.

On top of this change, there has also been a federal estate tax exclusion adjustment. This will rise in 2022, giving you an exemption for up to $12 million per person.

What does this increase in the gift tax mean for you?

The increased allowance means that you can gift up to $1,000 more per person when giving gifts without having to report that gift to the IRS. If you gift over the $16,000 limit, you will need to fill out Form 709 for the IRS, but the raised limit makes it easier to avoid that.

Additionally, if you are married, you and your spouse may gift a combined amount of up to $32,000 to each person. This is a significant amount, so it may be possible to reduce your estate’s value substantially without having to report where at least some of that money is going.

How much has the federal estate tax exclusion changed?

In 2021, the federal estate tax exclusion was set at $11.7 million for individuals and $23.4 million for couples. In 2022, this has risen to $12,060,000 and $24,120,000, so you or you and your spouse can plan for a larger portion of your assets to remain untaxed.

With these adjustments, it’s possible that you may want to update your estate plan. You have more leniency in the value of your estate, so you can avoid taxation.

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