When a person passes away, the deceased’s assets are subject to federal estate tax if the total value of their estate exceeds a certain threshold. The lifetime exclusion, also known as the estate tax exemption, is a tax provision that allows individuals to pass on a definite amount of wealth to their heirs without being subject to federal estate taxes. As of 2023, the lifetime exclusion is set at $12.92 million per individual, an increase from $12.06 million in 2022.
Currently, the federal estate tax is set at 40%. By utilizing the lifetime exclusion and proper estate planning, an individual can pass up to $12.92 million to their heirs without being taxed. Married couples can effectively double this exclusion by combining their individual lifetime exclusions. This can be done by filing an estate tax return and electing portability. Please refer to our previous article on portability for more details.
The lifetime exclusion is set to expire on December 31, 2025. The sunset provision was originally included in the Tax Cuts and Jobs Act of 2017, which dramatically increased the lifetime exclusion from $5.49 million to $11.18 million per individual. Unless Congress decides to extend it, the lifetime exclusion will revert to its pre-2018 amount of $5.49 million with adjustments for inflation. It is currently unclear whether Congress will take action to extend the provision beyond 2025. The uncertainty emphasizes the crucialness for individuals and families to consult with financial advisors and estate planning attorneys to ensure that their estate plans are structured in a tax-efficient manner.
If used correctly, the lifetime exclusion can be a valuable tool for individuals and families looking to pass on their wealth to future generations. Please contact for further information or assistance with your estate planning needs.
Note: Any changes to your estate plan must be drafted by your attorney.
About the Experts
Douglas A. Venturelli, Esq.
Tax, Estate & Trust, Gift and Probate, Sports & Entertainment
Douglas A. Venturelli is a Principal at KROST. He has over 45 years of experience in tax, estate, and business services. His main focus is federal estate and gift taxes. Doug consults with clients in the entertainment, legal, real estate, and medical industries. » Full Bio
Richard Umanoff, CPA, MBA
Tax, Estate & Trust, Gift and Probate
Richard Umanoff is a Principal at KROST. Richard’s career spans over 45 years, with a concentration in taxation. His primary emphasis is estate and trust tax compliance, planning, estate administration, and probate court accounting. Richard currently serves in the role of trustee for numerous clients. » Full Bio
This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 5/17/2023 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.