Keeping your estate plan up to date as your life changes is essential. You may need to adjust your plans when you or a loved one has a baby, or you or a family member goes through a divorce. Many more life changes will also affect your estate plan.
Understanding tax law changes and how they could impact your estate plan is also essential. You may want to review and adjust your beneficiary designations so that a greater portion of your assets go to your loved ones rather than to payment of taxes.
Here’s what you should know about the upcoming federal tax changes that could impact your estate plan.
Gift tax exclusions
Giving gifts to your loved ones is a way to provide them with part of your legacy now – while helping them avoid hefty taxes that diminish what you want them to receive. In 2023 the annual limit for tax-free gifts will increase from $16,000 to $17,000.
The increase means you can give your loved ones an additional $1,000 before they owe taxes on the gift.
Estate tax exemption
While Florida does not have estate or inheritance taxes, federal laws could impact your estate. In 2023, the lifetime gift tax exemption increases from $12.06 million to $12.92 million per individual.
The limit of $12.92 million includes previously taxable gifts already distributed to others. The increase means that more of your estate will be exempt from estate taxes, even if you have already distributed some of your assets as gifts.
It is essential to understand the tax implications that affect the terms of your will and other estate planning documents. You should talk to a skilled professional to determine the best strategy for your estate planning goals.