2024 Gifts and Estate Tax Updates

For trust and estate administrators, attorneys, and their clients, tax season is often marked by heightened responsibilities and potential challenges due to the ever-changing regulations and unique state laws.

As 2024 unfolds, it’s essential to remain current and proactive on the latest developments impacting estate planning and taxes. Below, we delve into important updates and strategies as the legal community and their clientele prepare for the 2024 tax season.

Key Federal Tax Changes for 2024

With 2024 already well underway, the landscape of federal tax laws has undergone significant revisions, particularly in the realms of estate and gift taxation. The noticeable increase in exclusion amounts headlines these updates and is poised to alter estate planning tactics.

Here’s a closer look at the major changes 2024 has brought:

• The annual gift tax exclusion increased from US $12,920,000 per taxpayer in 2023 to US $13,610,000 per taxpayer in 2024.
• Married couples have a combined total federal gift and estate tax exemption of US $27,220,000.
• An additional US $1,380,000 federal gift and estate tax exemption is available to married couples.
• Any total transfers during life or death over the federal gift and estate tax exemption are subject to a 40% federal gift or estate tax.

These legislative changes carve out additional tax-efficient gifting avenues and underscore the urgency for estate planning specialists to adopt a forward-thinking approach. With predictions pointing towards a significant reduction in these exemptions by 2025, 2024 could be an opportune period for estate planning experts to capitalize on these elevated exemptions. Giving vehicles like trusts or lifetime gifts can help your clients maximize their financial legacy under currently favorable conditions.

2024 State-Specific Updates and Proactive Planning Recommendations

Beyond the 2024 federal changes that have been announced, there are a series of new state-level tax updates that estate planners will need to be mindful of throughout the 2024 tax year, including:

• Gift Tax: Connecticut uniquely imposes a state gift tax with an exemption of $18,000 per person per year. No additional states added a gift tax for 2024. For states without a gift tax, such as California, Florida, and Pennsylvania, lifetime gifts can reduce future estate taxes.
• Estate Tax: States like Connecticut, New York, and Massachusetts have adopted new estate tax laws with specific exemptions and rates. These changes are relevant for both residents and non-residents who own property in these states.
• Inheritance Tax: Pennsylvania and New Jersey will now tax inheritances based on the recipient’s relationship to the deceased, with rates varying from 0% to 15%. Rates begin at 0% if it is a transfer to a spouse or charity and start at 15% if it is being transferred to an unrelated individual like a friend, coworker, or non-common law partner.

Estate planning professionals must remain conscious of varying estate tax and inheritance laws in different states, as they can materially impact an estate planning strategy’s effectiveness. For example, if your client resides in New Jersey, the deceased was their half-sibling, and the inheritance was over $1.4M, it would be taxed at 15%. This larger tax cut could affect anything from how they distribute their inheritance to how much they can spare to estate planning service fees and related budgets. Tailoring advice or looking into alternative gifting methods to account for the federal and state-level changes will allow for more sound, comprehensive guidance for clients.

Impact on Estate Planning Strategies

As they do annually, 2024’s revised estate and gifting tax regulations demand a thorough reevaluation of preexisting estate planning strategies, including reassessing gifting procedures, considering new avenues for tax-efficient wealth transfer, and staying up to date on any additional federal and state legislative developments.

Similarly, adjustments to income tax brackets and standard deductions may affect decisions regarding charitable giving, trusts, and other estate planning tools. Estate planning professionals might consider consulting with a tax specialist to ensure all relevant contingencies are thought out for your client and aligned with the latest tax laws.

How HeirSearch Can Help

As you optimize your clients’ estate and gifting strategies, consider the 2024 updates to gifts and estate tax regulations to best protect their assets. By leveraging the latest tax law updates in strategic planning, estate planners can more accurately ensure that their clients’ estates remain compliant and aligned with their long-term goals.

Another reason to remain well-prepared and up to date with federal and state tax laws is that, for many states, an estate’s value is determined by the date of the decedent’s death. Having a plan in place proactively can help ensure the optimally efficient distribution of an estate. This includes ensuring that all beneficiaries and heirs are carefully identified, ideally throughout the planning process versus following the passing of an estate owner as these searches can take time.

That’s where HeirSearch can help. HeirSearch’s researchers identify and locate missing or unknown beneficiaries and heirs for probate and trust termination, and we do so efficiently. We work exclusively with executors, administrators, trustees, fiduciaries, bank and trust officers, and their counsel to establish kinship and identify shareholders for legal purposes. With our search services, we can help ensure an heir is located and not be a contributing factor to a prolonged estate distribution process.

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