Los Altos Estate Planning — Taxes

Tax planning is an integral component of estate planning, and the attorneys at Kramer Radin, LLP stay current on the most recent tax law changes in order to carefully minimize your personal estate tax obligations. The following is a brief summary of recent estate, gift, and generation-skipping transfer tax changes.

Federal Estate Taxes

On December 31, 2012, Congress enacted the American Taxpayer Relief Act of 2012, which permanently provides for a maximum federal estate tax rate of 40% with an annually inflation adjusted $5,000,000 exclusion for estates of decedents dying after December 31, 2012.  The Act also made permanent a unique planning opportunity called “portability” between spouses. Portability refers to the transfer of the decedent’s unused applicable exclusion amount to the surviving spouse, on a timely filed estate tax return for the decedent. This unused applicable exclusion amount of the decedent can be added to the surviving spouse’s own applicable exclusion amount in effect at the time of his or her death.

Under the new Tax Cut and Jobs Act which went into effect January 1, 2018, the federal estate, gift and generation-skipping transfer (“GST”) tax exemption amounts increased to $13,610,000 for 2024.  This exemption amount is scheduled to increase with inflation each year until 2025. On January 1, 2026, the exemption amount is scheduled to revert to the 2017 level of $5.49 million, adjusted for inflation. The highest marginal federal estate and gift tax rates will remain at 40% and the GST tax rate will remain a flat 40%.

Federal Gift Taxes

For gifts made in 2024, the annual gift tax exclusion increased to $18,000.

Generation-Skipping Transfer Taxes

Generation-skipping transfer taxes (GST taxes) apply to outright gifts and transfers in trust that skip a generation or to unrelated individuals more than 37-and-one-half years younger than the donor. GST taxes are imposed if the transfer avoids incurring estate or gift tax at each generation level. GST tax is imposed at the highest marginal estate and gift tax rate applicable at the time of the gift, bequest, transfer or termination. As of January 1, 2024, the GST tax rate is 40 percent with a GST exemption of $13,610,000.  However, portability does not apply to the GST exemption.

Seek Experienced Legal Counsel

An experienced attorney can advise you of your estate planning options and the possible tax consequences of each option. For effective advice, assistance, and representation with trust and estate issues, contact Kramer Radin, LLP.

IRS CIRCULAR 230 NOTICE: Please be advised that, based on current IRS rules and standards, the advice above was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. If this message is provided in any manner to another taxpayer, he or she cannot use the advice and should seek advice based on his or her own particular circumstances from an independent tax advisor.