When a person passes away, the deceased’s assets are subject to federal estate tax if the total value of their estate exceeds a certain threshold. The lifetime exclusion, also known as the estate tax exemption, is a tax provision that allows individuals to pass on a definite amount of wealth to their heirs without being subject to federal estate taxes. As of 2023, the lifetime exclusion is set at $12.92 million per individual, an increase from $12.06 million in 2022.
Currently, the federal estate tax is set at 40%. By utilizing the lifetime exclusion and proper estate planning, an individual can pass up to $12.92 million to their heirs without being taxed. Married couples can effectively double this exclusion by combining their individual lifetime exclusions. This can be done by filing an estate tax return and electing portability. Please refer to our previous article on portability for more details.
The lifetime exclusion is set to expire on December 31, 2025. The sunset provision was originally included in the Tax Cuts and Jobs Act of 2017, which dramatically increased the lifetime exclusion from $5.49 million to $11.18 million per individual. Unless Congress decides to extend it, the lifetime exclusion will revert to its pre-2018 amount of $5.49 million with adjustments for inflation. It is currently unclear whether Congress will take action to extend the provision beyond 2025. The uncertainty emphasizes the crucialness for individuals and families to consult with financial advisors and estate planning attorneys to ensure that their estate plans are structured in a tax-efficient manner.
If used correctly, the lifetime exclusion can be a valuable tool for individuals and families looking to pass on their wealth to future generations. Please contact for further information or assistance with your estate planning needs.
Note: Any changes to your estate plan must be drafted by your attorney.
Read more on our Estate & Trust articles:
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- The Trust “Oil Change” – Reviewing and Updating Your Trust
- Benefits of Disclaimers in Post-Mortem Estate Planning
- What is a SLAT?
- Common Ways to Hold Title in California
- Uncommon Trusts
- Types of Trusts
- Advantages of Trusts for Estate Planning
- What is a Trust?
About KROST’s Estate and Gift, Trust, and Probate Services
Our estate planning team assists with the transition of family wealth and estate succession. Our team of experts has over 90 years of combined experience working with family-owned and privately held companies, as well as high-net-worth individuals. Our primary goal is to assist individuals and their attorneys to effectively transfer wealth while minimizing unnecessary estate, gift, and generation-skipping taxes. In addition, we can coordinate all of your Trust, probate, and estate planning needs to ensure a smooth transition while minimizing emotional, tax, and administrative burdens.
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About the Experts
Kimberly Hoang, CPA, Manager
Tax, Estate & Trust, Gift and Probate
Kimberly Hoang is a Manager in the tax department at KROST. She has been in the public accounting profession for over four years. Her areas of focus include tax planning and compliance for small to medium size businesses – sole proprietorships, partnerships, corporations, as well as high net-worth individuals.
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Douglas A. Venturelli, Esq., Principal
Tax, Estate & Trust, Gift and Probate, Sports & Entertainment
Douglas A. Venturelli is a Principal at KROST. He has over 45 years of experience in tax, estate, and business services. His main focus is federal estate and gift taxes. Doug consults with clients in the entertainment, legal, real estate, and medical industries. » Full Bio
Richard Umanoff, CPA, MBA, Principal
Tax, Estate & Trust, Gift and Probate
Richard Umanoff is a Principal at KROST. Richard’s career spans over 45 years, with a concentration in taxation. His primary emphasis is estate and trust tax compliance, planning, estate administration, and probate court accounting. Richard currently serves in the role of trustee for numerous clients. » Full Bio