Estate planning laws are always going through changes, and 2024 isn’t any exception. Sometimes, people need to pass down part of their estate prior to their death. One way to do this is through gifting.
Laws related to gifting limits went through a change in 2024. Understanding this crucial estate planning change is critical.
Enhancements in annual gifting limits
Each year, there are limits to how much one person can give to another person before the federal gift tax is triggered. In 2023, the limit was $17,000 per person, per recipient. This means that a single person could gift up to that amount without penalty. That amount doubles for couples as long as each party gives their own gift to the recipient.
In 2024, the annual limit increased to $18,000. This means that a couple could give a single recipient up to $36,000 without a federal tax penalty as long as each person gives no more than $18,000 to the same recipient.
Implications for estate planning
The implications of these changes are far-reaching for estate planning strategies. Individuals with larger estates may find it more feasible to transfer wealth to heirs without incurring substantial taxes.
These changes can lead to a reevaluation of existing estate plans, ensuring they align with the new thresholds. Additionally, the increase in gifting limits enables a more proactive approach to wealth distribution, potentially reducing the taxable estate’s size over time. Working with individuals familiar with these matters and updates is critical to ensure everything, including paying down an estate, is done in accordance with the law.