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Ask a trust officer: Federal estate taxes

February 2, 2022

DEAR TRUST OFFICER:  

At what wealth level do I need to worry about the federal estate tax?  AFFLUENT, NOT RICH

DEAR AFFLUENT:

That depends upon your circumstances.

The amount exempt from the federal estate and gift tax in 2022 will be inflation-adjusted to $12,060,000, up from $11,700,000 in 2021.  If you are married, you and your spouse each are entitled to an exempt amount, bringing the tax protection for family wealth to $24,120,000. 

If you plan to leave most of your wealth to charity, you won’t have to worry much about the federal estate tax, because there is no limit on the estate tax charitable deduction.

However, if you live until 2026, there is a different tax environment in-store.  The amount exempt is scheduled to fall roughly in half.  What’s more, there is some political support in Congress for accelerating that increase in taxation after death.

However, regardless of your wealth level, you need a plan for your estate.  There are many more considerations to take into account than the federal estate tax, which has always been targeted to the top 1% of wealth holders.  Income taxes, retirement plans, beneficiary protections, and investment choices are just a few of the issues you will want to review with your estate planning professional.  You must have a will—if you don’t have one, run, don’t walk, to an estate planning lawyer to have one drafted.  If you already have a will, how long since it has been reviewed?  Wills can easily go out of date, from changed family circumstances, changes in the tax law, or dramatic changes in asset values.

Do you have a question concerning wealth management or trusts?  Please contact Centier Financial Partners at 219-755-6110.

(December 2021)

© 2021 M.A. Co.  All rights reserved.

 

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