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2023: Estate Planning in the New Year

Posted by Erin Patterson | Feb 06, 2023

It's a new year and a good time to look ahead at the estate planning landscape of 2023.  Included below are some of the current hot topics and estate planning trends to be aware of.

The Basic Exclusion Amount

The current top tax rate for gift, estate and GST taxes is 40%.  The lifetime basic exclusion amount (“BEA”) is the amount that can pass free of gift, estate, or GST taxes – kind of like a coupon.  Although spouses enjoy an unlimited BEA for transfers between them during life or at death, gifts to non-spouses during life or at death are currently limited by the total BEA. 

The BEA was $12,060,000 per individual in 2022 but has increased, again due to inflation adjustments, to $12,920,000 per individual in 2023.  This means that the 40% tax rate will apply only to estates exceeding $12,920,000 in 2023.  Many wealthy families are choosing to make large gifts while the BEA is at this historic high.  Unless Congress acts before December 31, 2025, the BEA will “sunset” back to the pre-2018 level of $5,000,000, indexed for inflation, at the start of 2026.  Therefore, any family facing a taxable estate beginning in  2026 should consider using some or as much of the currently available BEA as they have left before then.

Additionally, in 2019, the IRS published “anti-clawback” regulations which clarified that individuals taking advantage of the increased BEA in effect since 2018 will not be adversely impacted after 2025.  However, recently issued proposed regulations would target some commonly used planning techniques and exclude them from anti-clawback protection, such as techniques where the grantor (the person transferring the property) retains title, possession, use, benefit or control of the transferred property.

More information can be found on the IRS website at: What's New - Estate and Gift Tax (IRS Website)

The Gift Tax Annual Exclusion Amount

In addition to the BEA described above, anyone can freely gift up to the gift tax annual exclusion amount each year to any other individual (the donee) without any tax or reporting requirement applying.  The gift tax annual exclusion amount was $16,000 per donee in 2022 but will increase to $17,000 per donee in 2023.  Since the annual exclusion amount is essentially a complete “freebie”, we often counsel clients to consider using it to gradually reduce the size of their own estate while enhancing the lives of their intended recipients.  If outright gifts to a donee are not ideal, gifts using vehicles like trusts can also be employed.

SECURE Act 2.0

At the end of 2019, Congress enacted rules under the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act which led to sweeping changes for retirement accounts. Since then, practitioners have lamented the lack of clarity surrounding many of the new rules.  At the end of 2022, Congress passed an update to its earlier legislation, the aptly named  SECURE Act 2.0.  Biden signed this new law into effect on December 29, 2022 and although many provisions will not go into effect until 2024, steps should be taken now to evaluate required or recommended updates to current plans. 

While the full breath of changes is beyond the scope of this article, some of the major changes included in the new law include (1) raising the age for required minimum distributions (RMDs) to begin from age 72 in 2022 to age 73 in 2023 and then again to age 75 in 2033, (2) allow tax-free rollovers from at least 15-year old 529 plans to Roth IRAs, with limitations, (3) reduce the penalty for missing an RMD from 50% to 25% (or even 10%, if the mistake is corrected timely), and (4) higher catch-up limitations for individuals whose age is 60-63.  These massive changes to retirement planning rules are part of the reason we recommend reviewing the nature, amount, contributions and distributions, and beneficiaries on our clients' plans at least annually.

For the full text of the SECURE Act 2.0, visit: Secure Act 2.0 (Senate Website)


The above developments represent only some of the ever-changing landscape of estate planning.  Our professionals are dedicated to bringing current developments and relevant planning opportunities to our clients based on their unique goals and within the bounds of the law.  As we enter a new year, please contact our office to discuss establishing or updating an estate plan that takes all of the above and more into account.

About the Author

Erin Patterson

Founding Partner

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