2022 Estate and Gift Taxes: What’s Changed?

March 1, 2022 | Patricia C. Marcin | Trusts & Estates

We were all set for big changes in the federal estate and gift tax laws last year and, by the end of the year, almost nothing changed. Who knows what changes will ultimately come down the pike when Congress finally becomes functional, and when those changes will take effect? For now, we’ve escaped the reduction of the federal estate and gift tax exemption to $5 million indexed for inflation, and the loss of the step-up in income tax basis in assets owned by someone at death. Some things, however, have changed for 2022.

First, the federal estate and gift tax exemption has increased from $11.7 million to $12.06 million giving U.S. citizens the ability to give away an additional $360,000 in the aggregate to non-spouse family members free of federal estate and gift tax. The federal annual gift tax exclusion amount has increased from $15,000 per donee to $16,000 per donee in 2022, which means that a U.S. couple can gift $32,000 together in 2022 to a non-spouse family member without using up any of their federal estate and gift tax exemption.

Second, the New York estate tax exemption has also increased. For 2022, the exemption is $6.11 million, up from $5.93 million, allowing another $180,000 to pass free of New York estate tax from a New York resident to non-spouse family members at death. Remember, while New York does not have a gift tax, it does require that gifts made within three years of death be brought back into the decedent’s estate for purposes of computing the New York estate tax. Also, New York still does not recognize “portability” (the ability of a surviving spouse to use the portion of the estate tax exemption the first spouse to die did not), while federal law does permit portability of a spouse’s unused federal estate and gift tax exemption.

Due to the uncertainty in the federal estate and gift tax laws, and in view of the fact that New York State “brings back” into one’s estate gifts made within three years of death (and doesn’t recognize portability), it makes sense to consider making gifts to family members sooner rather than later, especially if you expect those assets to appreciate.

This article first appeared in the March 2022 issue of Lloyd Harbor Life.

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