In the realm of financial planning, staying abreast of tax laws is a cornerstone of securing your family’s financial future.
The year 2024 brings about notable changes to inheritance tax and estate planning that warrant careful consideration for effective tax planning.
Increased exemption limits
One significant shift revolves around increased exemption limits. As of 2024, the federal estate tax exemption rose to $13.61 million, allowing individuals to pass on a larger portion of their estate without incurring federal estate taxes. This change provides an opportunity for families to preserve more wealth for future generations.
Annual gift exclusion adjustment
Another noteworthy adjustment is in the annual gift exclusion. In 2024, there is an adjustment to the limit for tax-free gifts. It permits individuals to gift $18,000 per donee annually without triggering gift taxes. Leveraging this provision can be a strategic way to reduce the overall taxable value of your estate over time.
Changes to generation-skipping transfer tax
The GSTT is subject to modifications in 2024. This tax, which applies when wealth transfers to beneficiaries who are more than one generation younger than the donor, has alterations in its rates and thresholds. Being aware of these changes is important for those planning to pass on assets to grandchildren or other descendants.
For those using trusts as part of their estate planning strategy, understanding the modified tax landscape is important. Trusts play a key role in wealth preservation, and the 2024 changes introduce nuances in their tax implications as there is a slight difference in the four-tiered tax brackets for trust income.
Planning for tax inheritance now is especially important as the limits will drop to 2018 levels in 2026. Staying informed and adapting your financial strategy accordingly can help you make the most of the evolving tax landscape.