While the anticipated legislative changes to the Federal estate, gift and generation skipping transfer tax exemptions never materialized during 2021, it is still a great time to take proactive measures in estate and business planning.

It’s important to take note of the current applicable estate, gift, and generation skipping transfer tax exemptions and rates as you review or begin your estate and business planning process.

Federal Estate, Gift, and Generation Skipping Transfer (“GST”) Tax Exemptions

In Revenue Procedure 2021-45, the IRS announced its inflation adjustments to key figures for calendar year 2022. For the first time in several years, the annual exclusion from Federal gift tax increased from $15,000 to $16,000 per year per gift recipient effective January 1, 2022.  The annual exclusion is the aggregate amount of present interest gifts that can be given without eroding any lifetime gift tax exemption. The annual amount that can gifted to a non-citizen spouse in 2022 is $164,000, and gifts between spouses remain unlimited if the recipient spouse is a U.S. citizen.

In addition to the annual exclusion increase, the federal lifetime gift, estate, and GST tax exemptions increased to $12,060,000 in 2022 (you can use all or any part of this exemption during lifetime while the remainder of the exemption will apply to your estate).  As a result, with proper planning, a married couple can effectively transfer to their beneficiaries $24,120,000 free from federal estate, gift, and GST taxes. The federal gift, estate and GST tax rates remain fixed at 40% over the exemption amount.

States across New England handle estate and gift tax exemptions in a myriad of ways.

Connecticut

The Connecticut estate and lifetime gift tax exemptions increased from $7,100,000 to $9,100,000 in 2022.  The Connecticut estate and gift tax rates continue to range between 7.8% and 12%.

Massachusetts

In Massachusetts, the estate tax exemption remains at $1,000,000 in 2022. The Massachusetts estate tax rates continue to range from 5.6% to 16%. Massachusetts does not impose its own gift or inheritance taxes which allows for lifetime gifts to be made while only considering the federal gift / estate tax exemption.

Rhode Island

The Rhode Island estate tax exemption increased to $1,648,111 in 2022.  The Rhode Island estate tax rate ranges from 0.8% to 16%. Rhode Island does not impose its own gift or inheritance taxes which, like Massachusetts, allows for lifetime gifts to be made while only considering the federal gift / estate tax exemption.

New Hampshire

New Hampshire still does not impose its own income, estate, gift, or inheritance taxes, and remains an attractive destination state for domicile planning.

Conclusion

Even with the potential for legislative changes in 2022, a proactive and comprehensive approach to estate planning is always a good idea. When it comes to protecting your wealth, “there is no time like the present.”