As of January 1, 2023, there have been several changes in law that may impact estate planning. These changes include:
- Increase in gift tax exclusion – The gift tax exclusion has increased to $17,000 per person, up from $16,000 in 2022. This change is beneficial as it allows individuals to give more money to others without incurring any federal gift tax liability or using any of their federal estate tax exemption at death.
- Increase in federal estate tax exemption – The federal estate tax exemption has increased to $12,920,000, up from $12,060,000. This change is beneficial as it allows individuals to pass on more assets to their heirs without incurring any federal estate tax liability. It’s worth noting that these higher federal estate tax exemptions will expire in 2025.
Many states have also increased their estate tax exemptions. For example, New York now has an estate tax exemption of $6,580,00. This change can be beneficial as it allows individuals to pass on more assets to their heirs without incurring any state estate tax liability.
Other changes that may impact estate planning include changes to Medicaid rates. These changes are summarized as follows:
- Increase in excluded assets – Medicaid now allows an individual who needs care, either at home or in a nursing home, to exclude up to $28,133 of their assets.If one spouse is at home, and the other in a nursing home, the spouse at home can protect up to $150,000 of assets.
- Increase in home exclusion -The value of the home, up to $1,033,000 is also exempt from Medicare if a spouse is living there or for an individual receiving Medicaid for home care. These changes can be beneficial as they allow individuals to protect more assets while receiving Medicaid benefits.
Finally, the age for required minimum distributions (RMDs) has increased to 73, up from 72. This change is beneficial as it allows individuals to keep their money in their retirement accounts for longer, potentially allowing for more growth.
A Fee-Only professional can help you understand all the changes in the law and advise you on how to update your will. They can help protect your legacy and achieve your wishes.
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