For people who pass away in 2022, the federal estate tax exemption amount adjusted for inflation is currently $12.06 million per person. For a married couple, that comes to a combined exemption amount of $24.12 million before any federal estate taxes are owed. Few people have estates worth more than that. But here’s what you really need to know.

The current high exemption levels which became law in 2017 with the passage of the Tax Cuts and Jobs Act (TCJA) are expiring. The TCJA specifically states that the doubled exemption level will sunset January 1, 2026, going back down to the 2017 level.

Luckily the state of California does not collect an estate tax. However, for people who inherit an estate worth more than the exempted amount, the federal tax bill is steep. Once an estate’s value exceeds the exempted amount by $1 million or more, it is taxed at 40%.

Indexed for inflation, the exemption in 2026 will go back down to around $6.6 million for an individual, and twice that for a couple. This means lot more people will be affected and subject to estate taxes, especially people in California with high property values!

There are many ways Damian Dering can help you handle estate planning in conjunction with your estate attorney (or ours if you don’t have one). Grantor trusts, certain irrevocable trusts, life insurance trusts (ILITs), generation-skipping trusts, family limited partnerships and/or other advanced strategies require great attention to detail as well as knowledge of IRS rules and tax laws.