INTERNAL REVENUE SERVICE 2022 ESTATE AND GIFT TAX EXEMPTION UPDATES

The Internal Revenue Service (IRS) releases updated estate tax exemptions and gift tax exemptions every year. For the calendar year of 2022, estate tax exemptions have increased to the amount of $12.06 million compared to the 2021 amount of $11.7 million. Gift tax exemptions for 2022 have increased to $16,000.00 annually from the total of $15,000.00 annually in 2021.

ESTATE TAX EXEMPTION APPLICABILITY

Estate tax exemptions for 2022 can be applied to the estates of individuals who pass away during the year of 2022. If an individual passed away during the year of 2021, the exemption total of $11.7 million will still apply for estate tax processes being completed in 2022. This total is subject to change in the year of 2023 as exemptions can differ from year to year.

ESTATE PLANNING FOR EXEMPTIONS

These exemption amounts are important to take into account when establishing an estate plan. For an individual or couple whose assets total greater than the $12.06 million exemption amount, this excess will be subject to federal taxing which can become very costly. There are many different options to help reduce the amount of assets that are subject to estate tax when an individual passes away. Some of these options include lifetime gifting under the annual gift tax exemption amount, portability planning between husband and wife, the creation of Irrevocable Life Insurance Trusts (ILITS), and the creation of credit-shelter trusts. Due to the wide variety of solutions and each situation being unique to the individuals involved, the estate tax lawyers at our firm provide advice that will be most beneficial for each client. By preparing for this possibility ahead of time, it can ultimately save your family members a lot of money that could otherwise be paid in taxes.

FEDERAL EXEMPTIONS VERSUS STATE EXEMPTIONS

A key thing to recognize is that the exemption amounts discussed previously are only applicable at the federal level. While federal exemptions are the same nation-wide, state tax exemptions differ from state to state. The Illinois estate tax exemption amount remains at $4 million as it has been in previous years. Due to the Illinois amount being significantly lower than the federal amount, more estates will be subject to taxing with larger amounts of assets being assessed. It should also be noted that Illinois’ estate tax does not have portability, meaning that the second to die spouse cannot use the unused exemption amounts from the first to die spouse’s estate. Therefore, it may make sense to reallocate assets between the estates of both spouses in Illinois through the creation of revocable trusts. Similarly, to estate planning for federal exemptions, speaking to an estate tax lawyer provides individualized advice on how to best allocate assets with the goal of decreasing the amount of an estate that is assessed for taxes.

CONTACT THE LIBERTYVILLE ESTATE TAX LAWYERS AT JOHNSTON TOMEI LENCZYCKI & GOLDBERG, LLC TODAY

The Federal estate tax can be onerous, but with planning it can be minimized. It is important to consider a comprehensive estate planning approach so that all options available may be utilized to reduce the estate tax. The Libertyville and Lake County estate planning lawyers at Johnston Tomei Lenczycki & Goldberg LLC will work with you to determine the best options available to reduce your estate tax liability. Call us today at (847) 549-0600 for a no-charge initial consultation. We offer flat-fee, upfront pricing so you will know the exact cost of our services before we enter into a representation agreement. Estate planning is important, but it does not have to be difficult. We strive to ease the burden of planning and leave you with a sense of peace when your plan is in place.