Knowing the 2024 Gift Tax and Generation-Skipping Transfer Tax exclusions is essential to efficient tax and estate planning.

Nobody can escape change. 

Ironically, change is considered to be the only constant in life.

Just ask Heraclitus.

Adaptability and awareness are crucial to adjusting to this reality.

The same holds true for estate planning. 

Estate planning strategies and documents are created to address the state and federal laws governing estates, taxes, and property transfers. 

Consequently, a clear and thorough understanding of gift taxes is essential.

Wealth transfer is impacted by changes in the federal gift and generation-skipping transfer (GST) tax.

While the 2024 tax changes are covered more thoroughly in a McDermott Will & Emery article titled “Prepare for Soaring Estate and Gift Tax Exclusions and GST Tax Exemption to Close after 2025,” this blog will provide a general overview.

What is Unique about the 2024 Gift and GST Tax Exclusions?

The 2024 federal gift and GST tax exclusion is the largest it has been in recent years, resulting from annual inflation adjustments. 

While these numbers are exciting for those with large estates, they will soon come to a scheduled end. 

After 2025, the tax exclusions will revert to the threshold levels before 2018 — with adjustments for inflation. 

Yikes!

To maximize the tax benefits of wealth transfer, estate planning and tax planning actions should be taken now. 

Do Tax Exclusions have State-Specific Considerations?

Like all estate planning and tax actions, one must consider both federal and state laws. 

While citizens of all states are subject to federal estate and gift tax laws, residents of some states will also have to address state taxes. 

Connecticut, New Jersey, and New York are known for their unique tax laws.

Even so, you do not have to live in one of these states to find it necessary to address federal and state laws in estate planning. 

What Estate Planning Strategies Can Be Used to Address Gift Taxes and GST Taxes?

Trusts are common tools for addressing tax liability in estate planning. 

What trust option might be recommended?

Dynasty Trusts

Dynasty trusts are designed to provide for future generations. 

Wealth is transferred over generations to minimize estate taxes over time.

Spousal Lifetime Access Trusts (SLATs)

SLATs are used to provide for a spouse. 

How do they work?

One spouse will gift assets to a trust for the benefit of the other spouse. 

This specific trust enables benefits from the gift tax exclusions and provides financial flexibility. 

Grantor-Retained Annuity Trusts (GRATs)

With GRATS, appreciation from assets can be transferred to beneficiaries while reducing the cost of gift taxes. 

Intrafamily Loans and Sales to Grantor Trusts

Under current regulations, sales to grantor trusts and intrafamily lines can provide a more direct wealth transfer to family members. 

How Can I Plan for Post-2025 Changes to Tax Exclusions?

Strategic planning and action are essential to addressing the changes to the tax exclusions in 2026. 

You can now utilize some of the available exclusions during this window of time to maximize your wealth transfer tax savings. 

Prioritize working with an experienced estate planning attorney in Kansas or Missouri to navigate tax exclusion changes before the end of 2025. 

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.