Estate Planning in New York City
IRS Announces 2024 Lifetime Exemption and Annual Gift Exclusion Amounts
In November 2023, the Internal Revenue Service (IRS) released Revenue Procedure 2023-34, outlining the annual inflation adjustments for tax provisions that will be used by individual taxpayers on their 2024 returns. These adjustments include the following:
- The estate, gift, and generation-skipping transfer tax exemption amount for 2024 is $13,610,000, an increase from $12,920,000 in 2023.
- The annual exclusion for gifts in 2024 is $18,000, up from $17,000 in 2023.
- In 2024, the first $185,000 of gifts to a non-citizen spouse (excluding gifts of future interests in property) will not be included in the total amount of taxable gifts made that year, an increase from $175,000 in 2023.
Key Takeaways: These projections reflect the continued high rate of inflation. The increase in the basic exclusion amount means that individuals can transfer $690,000 more (or $1,380,000 for married couples) free of transfer tax liability in 2024 compared to 2023. The annual exclusion amount for gifts has increased for the third consecutive year, from $15,000 in 2018 to $18,000 in 2024. Estate planning attorneys should work with clients to determine if they should take advantage of these planning opportunities, especially with the sunset of the enlarged exemption amount at the end of 2025.
Massachusetts Increases Estate Tax Exemption Amount
In October 2023, Massachusetts Governor Maura Healey signed An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity (the Act), which doubles the state’s estate tax exemption amount to $2 million. This change is retroactive for decedents who died on or after January 1, 2023 (§ 37). The estate tax applies to the taxable estates of Massachusetts residents at the time of death and nonresident decedents who own real and tangible personal property in the state at the time of death.
Key Takeaways: Since the new estate tax exemption amount is retroactive to January 1, 2023, personal representatives who filed estate tax returns for decedents who died earlier this year may seek refunds based on the new exemption amount.
California Adopts Uniform Directed Trust Act
In October 2023, Governor Gavin Newsom signed the California Uniform Directed Trust Act, which outlines the duties and responsibilities of trust directors (also known as trust advisors or protectors) and the duties and responsibilities of the trustee who is subject to the powers of the trust director, known as the directed trustee.
Key Takeaways: This new law provides a regulatory framework for the use of trust directors alongside trustees in California.
Trust Exempt from Realty Transfer Tax After Retroactive Modification
In September 2018, Bernard Ebersole and Jennifer Matlock, a married couple, created a trust (Trust). The Trust stated that assets transferred to the trust should be held “for our benefit while we are living.”
Key Takeaways: Revocable living trusts (RLTs) often contain gifting powers that can cause clients to miss opportunities to benefit from transfer tax exemptions, in jurisdictions where such exemptions exist when real property is transferred to their trust.
