As of January 1, 2024, the federal lifetime gift and estate tax exemption amount has increased to $13.61 million per person (up from $12.92 million in 2023). This means that individuals may now transfer up to $13.61 million - tax-free - during their lifetime or at death. Married couples may now transfer up to $27.22 million with proper estate planning.

The annual gift tax exclusion amount has also increased to $18,000 for individuals, or $36,000 for married couples.

Unless Congress makes the change permanent, these provisions will “sunset” on January 1, 2026, and the exemptions will revert to 2017 levels, adjusted for inflation – about half of what they are now. That might be around $7 million for individuals and $14 million for married couples.

These changes may impact your estate and gift strategy for the coming year – below are three key areas to consider:

1. Estate Planning
   Individuals and families with significant assets should reassess their estate plan to align with the updated exemption thresholds.
2. Gifting Strategy
   It is wise to consider gifting sooner rather than later, to take advantage of the current exemption thresholds. Strategic gifting can help reduce the size of one’s taxable estate, and maximize wealth transfer opportunities.
3. Exemption Portability
   Portability is a provision that allows a deceased spouse’s unused estate tax exclusion amount to transfer to the surviving spouse. Married couples can leverage portability provisions to effectively double their combined estate tax exemption, allowing them to preserve wealth and minimize estate tax liability.

In Massachusetts, the lifetime exemption amount is $2 million. This means that individuals may now transfer up to $2 million tax-free at death. Married couples may now transfer up to $4 million with proper estate planning. Massachusetts estate legislation was passed October 4, 2023, increasing the lifetime exemption from $1 million to $2 million. This change is retroactive in that it applies to deaths occurring after 2022. Unlike the prior $1 million exemption, the new legislation eliminates the so-called “cliff effect” – so if your estate goes over $2 million, only the difference above $2 million is taxed, not the entire estate, as it was previously.

Your CPA can help you navigate these changes to minimize your tax liability. If you have questions about the new estate and gift tax exemption thresholds, leave a comment below, or feel free to contact me directly. I’m happy to help.