Estate Tax Changes for 2024

Hi. This is Marc Herbert from Harvard Law Office with our annual report about changes in the estate and gift taxes for 2024. Now, I could do a ten minute video on each of these topics, but I just want to focus on the five most important issues that are going to affect most people who live in California. And the first change is the change in the federal gift tax.

So starting January 1st of 2024, everybody can gift up to $18,000 per person or $36,000 per couple without having to make any report to the IRS. And it’s important to remember that gift is per person per year. So you can gift to an immediate family member and a distant family member and a friend or coworker. That’s all protected under the current laws. You can also do it per year, so you can gift to the same person $18,000 in December of 2024 and then gift the same amount in January of 2025. And again, that’s going to be protected under the current laws because those are two different tax years.

Finally, I’d like to clarify a common question that I get is that any overage has to be taxable, and it actually is not taxable. It is something that you should report to the IRS and it applies to your lifetime estate tax, which we’ll talk about in a minute. But it is not a taxable event If you go over those new amounts for the federal gift tax.

Second topic I’d like to cover is talking about the new changes to the taxable income, to your trust or to your estate. So if you are the trustee of an irrevocable trust, like a special needs trust, or you’re the successor trustee to a living trust where the creators have now passed, you need to be aware of these new limits, and the new federal limit for that is $15.2 thousand. And if you go over that amount in any single year, then you’re subject to a 37% federal tax. Now, this tax won’t affect a lot of people because most people have a revocable trust, also known as a living trust. So you’re not going to fall under this tax issue. But for those operating special needs trusts and irrevocable trusts, you need to be aware that the new limit is $15.2 thousand per year.

The third subject we’re going to cover today is the federal estate tax exclusion. And that’s the big change. That’s the big tax that we’re all trying to avoid. So starting January 1st of 2024, the new limits are going to be $13.6 million per person, $27.2 million per couple. Now, these limits, of course, include all those lifetime gifts we just talked about a few minutes ago. And if you exceed that limit, you would now be subject to a 40% federal tax imposed on any overage. So it’s a good thing that the numbers keep going up, but we always have to remind folks that the current law is set to expire on January 1st of 2026. And at the moment, Congress plan is to roll back those limits to the 2017 levels with an adjustment for cost of living.

So at the moment, Congress’s plan as of January 2026 is to reduce that exclusion from 13.6 million to somewhere around 6 million per person and 12 million per couple. So you can see that is a huge loss of an exclusion and it’s going to affect a lot of people. There will be a lot of people who can also avoid that. But whenever Congress makes a change to that degree, it’s something that you really want to monitor with your assets, especially if you have a trust or an estate plan that’s a few years old. Your assets may have increased in number or in value and you really have to be careful because you want to avoid that 40% tax whenever possible.

And that leads to the fourth topic, which is called portability. Luckily, the portability laws are not changed in 2024, and that’s a good thing for married couples. Portability basically says when one spouse passes any unused balance of their federal estate tax exclusion gets transferred over to the surviving spouse. Then when the surviving spouse passes, he or she has their own exclusion plus the unused balance to make transfers to their beneficiaries.

So portability is a huge benefit to married couples. Unfortunately, portability is not available for single persons. So whether you’re divorced or unmarried or widowed, you are not able to take advantage of portability. Now, that doesn’t affect the California tax laws, of course, especially Proposition 19, which passed a few years ago. That law basically says that any non spouse, such as our children who inherit $1,000,000 or more of land before they reach the age of 55 years old are going to be subject to massive property tax increases. So that’s something else to be aware of. Not only do you have to watch the federal side, but also be aware that with the increases in values, that you might also be subject to taxes. On the state side in California.

And that leads to our fifth and final topic, which is estate planning. So for most unmarried people and married couples. The best way to navigate through all these tax laws is to create your own customized comprehensive estate plan, including a living trust for most people by building your own plan. You decide who’s in charge if you’re ever incapacitated or pass away. You also decide who is included, what assets are going to be transferred to which beneficiaries. And you can control the ages and amounts of any distributions for young or disabled heirs. Your loved ones also can avoid the costs and delays and stresses of having to go to probate court where a judge who never met you is going to enforce California law.

And that may not be what you want done with your assets. So we offer a free consultation to discuss your current situation, to answer all your questions. We’ll even review your current estate plan. If it’s been a few years since you’ve looked at it, now’s a really good time to review it based on these new changes. And we do offer a free consultation in person by phone or by video, whichever you prefer, so that we can get this information to you and you can make a good decision to protect yourself, your family and your assets.

So I hope this video has been helpful for you. Please feel free to share it or like and always feel free to visit our website at Have a good day.