Dear Friends and Clients:
Happy Holidays! As with years past, we wanted to send a letter to friends and clients with new information on prospective tax updates and law changes, as well as key estate planning reminders for an estate planning checkup.
We are excited to see what this new year will bring us. We hope that we can continue to provide assistance to our community with information and services in 2023 and beyond.
-The Saalfeld Griggs PC Estate Planning Team
Federal Gift and Estate Tax Amounts
Estate and Gift Tax Exemption:
The estate and gift tax exemption for is set to increase from the currently $12.06 million to $12.92 million on January 1, 2023. Any assets in excess to that amount is subject to a flat tax rate of 40%.
The annual gift tax exclusion for 2022 is currently $16,000 per donor per donee. The annual gift tax exclusion is set to increase January 1, 2023, to $17,000 per donor per donee. If total gifts to a donee are under this amount, no gift tax return is required and the amount does not reduce the donor’s estate and gift tax exemption. Keep in mind that qualified gifts for tuition and medical bills, if paid directly to the educational or medical institution, do not count against the annual gift tax exclusion or the lifetime estate and gift tax exemption.
Generation-Skipping Transfer Tax Exemption:
The “GST” exemption will remain the same as the federal estate and gift tax exemption, or $12.06 million for 2022, and $12.92 million for 2023.
Reminder: The federal estate, gift, and generation-skipping tax exemptions are based on the 2018 Tax Act, and are currently set to sunset on December 31, 2025. That means that the exemptions will return to the lower pre-2018 levels on January 1, 2026. With this in mind, individuals who can afford to make gifts in excess of the pre-2018 limit should consider making gifts that utilize these higher exemptions, particularly because any unused exemption will “disappear.” In other words, a donor will need to make a gift above the pre-2018 tax level (i.e., $5.5 million indexed for inflation) to utilize the “disappearing” exemption amount. It is estimated that the inflation-adjusted exemption amount for 2026, if the law does not change, will be approximately $6.4 million.
Required Minimum Distributions (“RMDs”)on Inherited Retirement Accounts:
In 2020, the SECURE Act created a 10-year payout rule for inherited retirement assets, such that the account must be fully withdrawn within 10 years after the death of the plan participant. It was commonly interpreted that withdrawal of RMDs would not be required during that 10-year period. However, the IRS recently issued proposed regulations (IRS Notice 2022-53) stating that RMDs shall be required during the 10-year period. The Notice further clarifies, however, that the IRS would not penalize beneficiaries for not taking RMDs in 2021 or 2022 because of the common interpretation. Final regulations, however, have not been issued. Please discuss this issue with you CPA and/or Financial Advisor.
State Gift and Estate Tax Amounts
The Oregon estate tax exemption remains at $1 million with any excess amount subject to a marginal tax rate of 10-16% for 2022 and beyond. The Oregon exemption is not indexed for inflation.
The Washington estate tax exemption for 2022 remains at $2.193 million, with any excess subject to a marginal tax rate of 10-20% for 2022 and beyond.
Recall that neither Oregon nor Washington has a gift tax. As such, gifts made during life do not reduce the Oregon and Washington estate tax exemptions.
Estate Planning Checkup
Changed Circumstances:
Have your cirumstances changed due to marriage, divorce, the birth of a child, retirement, or an inheritance?
Beneficiary Designations:
Do retirement accounts and life insurance policies designate proper beneficiaries per your plan, particularly in case of employment change or change in custodians or managers of assets?
Living Trust Funding:
Are appropriate assets properly titled in, or connected with, your trust?
Saalfeld Griggs’ Estate Planning Team also has exciting news to share as we welcome three new estate planning attorneys; Tom Sayeg, Brent Kinkade, and Annie Nelson. Our new attorneys will be based in our new Bend, Oregon office location. Welcome Tom, Brent, and Annie!
Jeffrey G. Moore | jmoore@sglaw.com
Meghan V. Graf | mgraf@sglaw.com
503-399-1070 | www.sglaw.com
This publication is prepared by the law firm of Saalfeld Griggs PC as an information source. For further information on the matters addressed in this letter or to request inclusion on the mailing list, please contact Miranda Hugie in our office. The contents of this publication should not be construed as legal advice. Readers should not act upon information presented in this publication without individual professional counseling. Receipt of this publication does not constitute or create an attorney-client relationship. The material in this publication may not be reproduced without the written permission of Saalfeld Griggs PC.