The 2023 “Gift and Estate Tax Exemption” amount is $12,920,000 for a single person, or $25,840,000 for a married couple.
This means that if you die in 2023 and the total fair market value of your assets at your time of death exceeds $12,920,000 every dollar more will be subject to an Estate tax of 18-40% before it can be handed to your heirs or beneficiaries. This is figured on form 706.
Your estate will also have to pay annual income tax, on form 1041, for any income that is earned on your assets or investments from the time you died until it is given to your heirs.
Annually you may give up to the annual gift tax exclusion amount ($17,000 in 2023) to as many people as you want as a “non taxable gift” during the year. Many who have large estates do this to move money out of their estate and to the heirs without paying 18-40% estate tax on it at their death. Gifts given beyond the annual exclusion amount use up some of the total you are allowed at your death and a Gift Tax Return (form 709) must be filed to report the taxable gift. Tax is only due on the larger gift if your cumulative gifts you have already gifted in your lifetime goes beyond the limit, $12,920,000 in 2023.
The federal Gift and Estate Tax Exemption is set to decrease to $5 million per person in 2026.