We serve privately held and family businesses, angel and venture-backed companies, public companies, foundations, not-for-profit and public sector organizations, and high net worth individuals and their families.
Are you considering making a substantial gift? Here are five reasons to act sooner than later:
1. Lifetime Gift Tax Exemption Is at an All-Time High
The Federal 2023 total individual lifetime gift tax exemption has increased to $12,920,000, which means that a married couple can now gift up to $25,840,000 without incurring any federal gift tax, assuming that no prior taxable gifts have been reported.
2. The Current Lifetime Gift Tax Exemption May Be Cut by Half in the Future
Unless Congress acts, which is a long-shot due to the divided control of the House and Senate, the current 2023 lifetime gifting exemption will sunset, effective December 31, 2025. Thus, the exemption may be cut by approximately 50%, around $6.8 million per individual with adjustments for inflation. At the highest federal estate tax rate of 40%, the decrease in the lifetime exemption would result in a tax increase of approximately $2.5 million.
3. Relatively Larger Gifts Can Be Made
As all of us know, 2022 was brutal for value declines in almost every asset category, including stocks, bonds, real estate, and many privately owned businesses. At the 2023 values, larger gifts can be made compared to values from a year or even six months ago. Take advantage of the turmoil in the financial markets and make family gifts if it works with your long-term financial and cash flow planning goals.
4. You Could Apply a 10%-30% Valuation Discount
Even though the current Administration would like to have valuation discounts repealed, the IRS is still allowing well documented valuation discounts for lack of control and marketability. Take advantage now of applying a 10%-30% valuation discount by spending just a fraction of that tax savings. Work with a highly qualified valuation professional to ensure that such valuations will be respected by the IRS and not subjected to future challenge.
5. Washington State Currently Does Not Impose a Gift Tax
Lastly, take advantage now of the quirky and often-overlooked fact that Washington State does not impose a gift tax, thus making unlimited lifetime gifting a reality. However, any remaining assets in your estate (exceeding $2,193,000), will be subject to a draconian estate tax rate of 10% to 20%. With Washington State currently looking at all options for additional tax revenue opportunities—an example being the first ever capital gains tax—this unlimited lifetime gifting exemption may not last forever.
Conclusion
Now is the perfect time to make a substantial gift. Federally, the individual lifetime gift tax exemption is higher than ever, but it may not stay that way for long. Not only can you make larger gifts, but you could also apply significant discounts when working with a qualified professional. If you are a Washington State resident, you have an even more unique opportunity to take advantage of unlimited lifetime gifting sans gift tax. Overall, by being aware of the current market and ever-changing federal and state taxes, you can maximize your gift giving while saving your wallet.
If you have any questions regarding the above thoughts, please contact us and we would be happy to speak in further depth.
This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.
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