Some people who are in the process of doing their estate plans or those considering doing their estate plans in the future might have heard about Increased Estate, Gift Tax Exemption & Annual Exclusion. Skilled attorneys at Futterman Lanza, LLP are here to walk you through these rules and to guide you on what you need to know about each tax.
1. What is an Estate Tax?
First and foremost, an Estate Tax comes into play only when a person dies. Depending on the value of the estate of the decedent, the estate may be subjected to a Federal Estate Tax. For decedents who died in 2024, the basic exclusion amount was $13,610,000. This number was increased to $13,990,000 for people who will die in 2025. What this means is the estates of the people who die in 2025 with a value of less than $13,990,000 will not be subjected to Federal Estate Tax.
2. What is a Gift Tax Exemption?
A Gift Tax Exemption refers to the amount of assets a person can give to someone else without triggering a tax consequence. A Gift Tax Exemption was put in place to support the integrity of the estate tax.
3. What is the Annual Exclusion in relation to the Gift Tax Exemption?
An Annual Exclusion in relation to the Gift Tax Exemption is the amount of money a person can gift/transfer to another without making it a taxable event. In 2024, IRS limited the gifts/transfers to $18,000 per person. In 2025, that number increased to $19,000. This means that generally any person can give another person up to $19,000 in 2025 (or each calendar year) without having to pay any Federal Gift Tax or file a gift tax return.
Importance of the Increased Estate, Gift Tax Exemption & Annual Exclusion
It is crucial to keep up with the IRS updates when it comes to Estate and Gift Taxes when working on your estate plan. Many aspects of estate planning require people to make gifts and transfers of their assets for the purpose of preserving their wealth. Make sure to contact one of our Estate Planning attorneys to learn more about what plan is best for you.