As we begin the new year, this federal tax update highlights federal tax information related to estate planning that can be useful when considering planning options for 2022. Since Congress may pass amending legislation this information during the year, you should contact your estate planning officer. lawyer for advice before taking any transfer tax planning action.

Key tax concepts for 2022

• Lifetime exclusion rises to $ 12,060,000: As of January 1, 2022, the exclusion amount from federal gift and inheritance tax, as well as the exemption from the tax on transfers skipping generation (TPS), (collectively, the “exclusion amounts transfer tax ”) increased by $ 360,000, from $ 11,700,000 to $ 12,060,000 ($ 24,120,000 for a married couple). Please note, however, that the transfer tax exclusion amounts are expected to decrease on January 1, 2026, to $ 5,000,000 adjusted for inflation.
• Annual exclusion rises to $ 16,000: As of January 1, 2022, the annual federal gift tax exclusion amount (that is, the amount that an individual can transfer annually to another individual without using an income tax exclusion). lifetime gifts (neither paying tax on gifts) increased by $ 1,000 from $ 15,000 to $ 16,000 ($ 32,000 for a married couple).
• The federal tax rates applicable to estates and trusts remain unchanged:
  • Federal inheritance tax, gift tax and the top GST tax rate remain at 40%.
  • The top federal tax rate for estates and non-grantor trusts is 37%. This tax rate applies to taxable income over $ 13,450 earned by an estate trust or non-grantor trust during its period of administration.
• Minimum required distributions: New life expectancy tables used to determine minimum required distributions (RMD) IRAs and Qualified Pension Plans came into effect on January 1, 2022. These changes impact traditional (non-Roth) IRA owners who have reached their required start date to take RMD, participants to qualified retirement plans who have reached their required start date to take RMD; and beneficiaries of an inherited IRA or qualified retirement plan. Please contact your plan administrator or financial advisor to find out how to calculate your RMD for the 2022 calendar year using the new tables.
• Base ramp-up: Under current federal tax laws, the income tax base on property acquired from a deceased person is generally adjusted to the fair market value of that property on the date of the deceased’s death (often referred to as a “Base increased” at death). While there have been proposals in Congress to change this, Congress did not pass these proposals in 2021, so the base increase on death remains in effect for 2022.
• Portability of federal inheritance tax: The ability to transfer the unused Federal Estate Tax Exclusion Amount from a deceased to the surviving spouse of the deceased by completing a Federal Estate Tax Return (often referred to as a “portability“) Remains in effect for 2022.

Update on Build Back Better Act

The House of Representatives passed the Build Back Better law on November 19, 2021. As of the date of this federal tax update, the Senate has not yet voted on the law. The version of the law passed by the House of Commons does not change the federal tax rate of 37% on ordinary income, does not change the federal tax rate of 20% on long-term capital gains or eligible dividends, does not affect the 40% federal transfer tax. interest rates, change federal transfer tax exclusion amounts, or interfere with the use of grantor trusts for estate planning purposes. However, the version passed by the House of Commons, if enacted, would impose a new federal additional income tax of 5% on modified adjusted gross income above $ 10 million for both unmarried and married individuals. filing jointly or on amended adjusted gross income. income greater than $ 200,000 for estates and non-grantor trusts. And, if enacted, another federal income tax of 3% (after application of the additional 5% tax) would be imposed on modified adjusted gross income over $ 25 million for unmarried individuals and for married persons filing jointly or on amended adjusted gross income exceeding $ 500,000 for estates and non-grantor trusts. A variety of other federal tax law changes are also included in the version passed by the House of Commons. As Congress continues to negotiate legislation, important federal tax laws could change at any time in 2022. Therefore, you should contact your Lathrop GPM estate planning attorney for advice before taking any estate planning action. transfer taxes.

Contact your estate planning lawyer for more information

In light of the above, there are estate planning and business succession planning opportunities available in 2022, and you may wish to have your current estate plan reviewed to ensure that your documents continue to meet your business goals. tax and non-tax planning. Please contact your estate planning lawyer to ensure that your estate plan continues to reflect your intentions and to ask if any estate planning opportunities are appropriate for you.

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