Estate Planning – Four Numbers to Keep in Mind
Many of our estate planning strategies revolve around important numbers that are determined under federal and state law related to estate and gift tax exemptions. With federal estate tax rates as high as 40 percent and CT rates as high as 12 percent, families are heavily incented to plan around the estate tax and maximize the use of available exemptions. Here are four numbers to keep in mind for 2022.
- Federal Estate Tax Exemption. The federal estate tax exemption for property passing to non-spouse beneficiaries has increased to $12,060,000 for 2022. This means that you may protect up to $12.06M in your estate that passes tax-free to your beneficiaries. Also, under federal law, this exemption is “portable”, meaning that a surviving spouse may claim a decedent spouse’s exemption, thereby increasing the total exemption for married couples to $24.12M. This higher amount is scheduled to sunset on 12/31/2025.
- State Estate Tax Exemption. The Connecticut, Massachusetts, and Rhode Island lifetime exemptions for property passing to non-spouse beneficiaries are $9.1M, $1M, and $1,500,000, respectively. Unlike the federal exemption, the state exemptions are not easily portable; therefore, each individual (including a surviving spouse) may protect only a much lower number than the federal exemption allows. Note that all of your assets – including non-probate retirement assets and the value of a business you own – are included in the calculation of the total exemption amounts.
- Gift Tax Exclusion. For 2022, the annual gift tax exclusion has increased to $16,000 per donee, and to $32,000 for married couple who split gifts. This means you and your spouse may gift up to $32,000 per person without any negative tax consequences. Gifts in excess of the exclusion amounts are applied to the lifetime exemptions mentioned above.
- Long Term Care in a Nursing Facility. In CT, if one spouse is living in a nursing home and the other spouse remains at home (the “Community Spouse”), then the maximum amount of non-excluded assets the Community Spouse can keep is $137,400.
For advice related to estate and tax planning, or any other matters related to your family or business needs, please contact Fournier Legal Services at 860.670.3535 or visit jeflegal.com.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.
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