Strategic Estate Planning Before 2026 BEA Change Can Protect Taxpayer Assets from Gift and Estate Tax
In 2017, Congress enacted the Tax Cuts and Jobs Act, doubling the estate and gift tax exemption. This increase is set to expire on Jan. 1, 2026, reverting to pre-TCJA levels. Taxpayers should understand strategies to take advantage of the increased exemption before it expires to shield their assets from future gift and estate taxes. Stephen L. Ferszt, chair of Olshan Frome Wolosky's Employee Benefits Practice discusses the complex landscape of estate planning and the critical decisions taxpayers need to make before the BEA rollback takes effect.
June 25, 2024 at 10:00 AM
5 minute read
In 2017, Congress enacted the Tax Cuts and Jobs Act (TCJA), which doubled the estate and gift tax exemption. Due to congressional cost requirements, this increase is set to expire on Jan. 1, 2026, reverting to pre-TCJA levels, indexed for inflation.
The Internal Revenue Code sets forth how much taxpayers may transfer during their lifetime or at death without incurring federal gift or estate taxes. This threshold is known as the Basic Exclusion Amount (BEA). Gifts to non-spouse donees reduce a taxpayer's available BEA, while any remaining BEA at death can shield assets from estate taxes. Transfers exceeding the BEA are subject to gift or estate taxes, with rates ranging from 18% to 40%.
The tax laws also allow taxpayers an annual gift tax exclusion of $18,000, which is the amount that can be given each year, per donee, without reducing their available BEA. The TCJA doubled the BEA from $5 million to $10 million (or $10 million to $20 million for married couples), adjusted for inflation, for the years 2018 through 2025. For 2024, the BEA is $13.61 million for individuals and $27.22 million for married couples.
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