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Estate Planning Tax Update For 2022

Updated: Jan 11, 2022


As we start the new year, this article highlights estate planning-related federal tax information that may be helpful as you consider planning options for 2022. Because Congress could pass legislation that changes this information during the year, you should contact the Law Office of Joseph M. Barton or your tax professional for advice prior to taking any transfer tax planning action.


Key Tax Concepts for 2022

  • Lifetime Exclusion Increases to $12,060,000: As of January 1, 2022, the federal gift and estate tax exclusion amount, as well as the exemption from generation-skipping transfer (GST) tax, (collectively, the “transfer tax exclusion amounts”) have increased by $360,000 from $11,700,000 to $12,060,000 ($24,120,000 for a married couple). Please note, however, that the transfer tax exclusion amounts are scheduled to decrease on January 1, 2026, to $5,000,000 adjusted for inflation.

  • Annual Exclusion Increases to $16,000: As of January 1, 2022, the federal gift tax annual exclusion amount (i.e., the amount that an individual can annually transfer to another individual without using any lifetime gift tax exclusion or paying any gift tax) increased by $1,000 from $15,000 to $16,000 ($32,000 for a married couple).

  • Applicable Federal Tax Rates for Estates and Trusts are Unchanged:

    • The highest federal estate tax, gift tax, and GST tax rate remains at 40%.

    • The highest federal income tax rate for estates and non-grantor trusts is 37%. This tax rate applies to taxable income over $13,450 earned by an estate or non-grantor trust during its administration period.

  • Required Minimum Distributions: New life expectancy tables used for determining required minimum distributions (RMDs) from IRAs and qualified retirement plans went into effect as of January 1, 2022. These changes impact traditional (non-Roth) IRA owners who have reached their Required Beginning Date for taking RMDs, qualified retirement plan participants who have reached their Required Beginning Date for taking RMDs, and beneficiaries of an inherited IRA or qualified retirement plan. Please contact your plan administrator or financial advisor regarding how to compute your RMDs for calendar year 2022 using the new tables.

  • Step-Up in Basis: Under current federal tax laws, the income tax basis of property acquired from a decedent generally is adjusted to the fair market value of that property as of the date of the decedent’s death (often referred to as a “step-up” in basis at death). Although there were proposals in Congress to change this, Congress did not pass those proposals in 2021, so the step-up in basis at death remains in effect for 2022.

  • Federal Estate Tax Portability: The ability to transfer a decedent’s unused federal estate tax exclusion amount to the decedent’s surviving spouse by filing a federal estate tax return (often referred to as “portability”) remains in effect for 2022.

Contact the Law Office of Joseph M. Barton at 415-235-9162 if you would like to discuss the new estate planning tax laws or if you would like to establish or revise your estate plan.


Source: https://www.jdsupra.com/legalnews/estate-planning-2022-federal-tax-update-3089325/

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