Increases In Transfer Tax Exemptions For 2024

The Federal Tax Cuts and Jobs Act of 2017 (“TCJA”) amended section 2010(c)(3) of the Internal Revenue Code (the “Code”) to provide that, for decedents dying and gifts made after December 31, 2017 and before January 1, 2026, the basic exclusion amount (BEA) and Generation-Skipping Transfer Tax (“GST”) exemptions would increase to $10 million as adjusted for inflation. On January 1, 2026, these exemptions will revert to $5 million (the pre-TCJA figure), adjusted for inflation. The inflation adjustments over the years since 2018 have resulted in BEA and GST Exemptions of $12,920,000 in 2023.

On November 9, 2023 the IRS issued Revenue Procedure 2023-34 setting forth the inflation adjusted transfer tax exemptions for 2024. The BEA will be $13,610,000—an increase of $690,000. The increase means that in 2024, an individual may make gifts during life or at death totaling $13,610,000 without incurring gift or estate tax; a married couple will be able to transfer $27,220,000 of assets free of transfer taxes. The GST Exemption under section 2631 of the Code will also increase to $13,610,000.

The annual gift tax exclusion provided by Code section 2503 will increase in 2024 to $18,000 per donee (or $36,000 if spouses elect gift-splitting).

The gift tax annual exclusion for gifts to non-citizen spouses as set forth in Code sections 2503 and 2523(i)(2) will increase to $185,000.

The larger exemptions in 2024 (and likely larger ones in 2025) represent an opportunity for those who have made full use of their exemptions to date, because even a taxpayer who has fully used the BEA in sheltering lifetime gifts will be able to give additional amounts free from transfer taxes over the next two years.

Those who have made large gifts to irrevocable trusts or outright to descendants should consider additional gifts in 2024 to take advantage of the increases in the BEA and the GST Exemption. To other who perhaps have been considering making gifts before the planned reductions of the exemptions in 2026, we recommend consulting your estate planning attorney about strategies that will secure the benefit of the larger estate, gift and GST exemptions before they sunset at the end of 2025.

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