The federal estate and gift tax exemption (the combined amount you can give away to beneficiaries other than your spouse or charities during life and at death without paying gift or estate tax) is increasing to $13.61 million per person as of January 1, 2024, up from $12.92 million in 2023. This is an increase of $690,000 per person, meaning that married couples have a combined exemption of $27.220 million.

The federal exemption amount, however, is set to automatically reduce to $5 million indexed for inflation (estimated at $7 million) as of January 1, 2026, unless Congress takes action.

While many high net worth estates are currently exempt from the federal estate tax, the potential, and maybe even likely, reduction in the federal exemption in 2026 may subject many more such estates to federal estate tax. Individuals with assets valued over about $7 million, and couples with assets valued over about $14 million, should consider estate planning through gifting techniques well before December 31, 2025.

Note that New York has not yet released the New York State estate tax exemption amount for 2024; the New York exemption amount for 2023 is $6.58 million. New York State does not have a gift tax, but gifts made within three years of death are brought back into a donor’s estate for New York State estate tax purposes.

The federal annual exclusion amount for gifts made in 2024 has been increased to $18,000, up from $17,000 in 2023. This is the amount of gifts one may give to any number of individuals each year without using any of their federal estate and gift tax exemption amount.