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.