Estate Planning Law Changes You Need to Know About

by | Jan 16, 2022 | Firm News

When it comes to estate planning, it is crucial to keep up with current laws that can affect estate planning strategies. For example, tax laws frequently change, which can have a major impact on how you may want to structure your estate plans. Whether you are thinking about getting started with estate planning, or you already have plans in place, it is a good idea to pay attention to big changes in tax and estate law to plan for your future in the most efficient way.

Estate Planning Attorneys in California

At Galanti and Copenhaver, we make sure to stay current and up to date on tax law and other areas of law that may impact how we advise our clients to structure and manage their estate plans. Give us a call today to learn more about what we can do to help you adjust your estate plans or to get started with the estate planning process.

Federal Estate Tax Exemption Update 2022

An estate tax is a tax placed on the estate of someone who passes away before the assets and property of the estate are disbursed to the heirs and beneficiaries. California does not impose an estate tax at the state level, but there is a federal estate tax that residents should be aware of.

The federal estate tax is not applied to every estate. It only applies to estates that are of a certain size and value. The threshold at which an estate is charged an estate tax varies from state to state. In California, the federal estate tax exemption is increased in 2022 to $12,060,000. Currently, this exemption will remain at this amount until 2025.

Federal Gift Tax Update 2022

A gift tax is a tax levied on property or money that someone gives to another. Each year, you can gift up to a certain amount of money per person before taxes are charged, under federal law.

For 2022, the tax-free annual exclusion amount is $16,000. This means that you can gift someone up to $16,000 this year without having any tax applied to the money. It is important to note that this amount is individual. If you are married, you and your spouse can each gift $16,000 to someone this year without triggering this federal tax.

In 2022, the cumulative lifetime exemption for gifts increased to $12,060,000 for this year until at least 2025. While the lifetime exemption is not a concern for most people, if you have a large number of assets, it is something that you should be aware of.

With the lifetime exemption, taxes are owed on gifts you give throughout your lifetime once you reach a total of $12,060,000 in gifts paid to other people. The tax amount owed after this cumulative sum reaches $12,060,000 is 40% on gifts beyond that amount.

Federal Estate and Gift Tax Considerations Over the Next Few Years

After 2025, the federal estate and gift tax exemptions are scheduled to revert to the previous levels as of 2018, at about five million dollars. However, the exact exemption in 2026 is unknown since the federal government will adjust this amount for inflation. The law could also change to extend the higher exemption limit further.

If you have a large estate and substantial assets, you should speak with an estate planning attorney to ensure that you are taking advantage of this time period for your benefit. The IRS has confirmed that anyone who chooses to take advantage of the increased gift tax exclusion from 2018 through 2025 will not suffer adverse consequences for doing so.

California Estate Planning

For this year, there are no major law changes at the state level that will significantly impact estate planning. New legislation is proposed often, so it is still helpful to keep track of laws and proposed changes to the laws so that you have time to act if necessary.

For example, if it looks like specific proposed state legislation might pass that could negatively impact your estate plans, you can meet with your estate planning attorney beforehand. This way, you can get ahead of any legal changes that could be detrimental to your estate and your current estate plans.

Your estate planning attorney will be able to help you determine if there are any changes you should make to your current estate plans in light of any changes in the law. It is always a good idea to review your estate plans from time to time anyway to ensure that what you have in place accurately reflects your wishes.

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