Increased US Gift and Estate Tax Exemptions and Further Planning Opportunities in 2022

Notwithstanding a number of legislative proposals in 2021, the US gift and estate tax regime remains unchanged for the time being. Inflation adjustments for certain exclusion and exemption amounts have automatically been applied (as of 1 January 2022):

  • The ‘unified’ lifetime gift and estate tax exemption amount (applicable to US citizens and most green card holders) has increased from $11,700,000 to $12,060,000. Under current law, this exemption amount will automatically revert to $5,000,000 (indexed for inflation from 2010, so approximately $6,000,000) as of 1 January 2026.
  • The exemption amount for non-US domiciled individuals remains as is at only $60,000 for their US situs assets.
  • The annual exclusion amount for gifts to non-spouses has increased from $15,000 to $16,000 per recipient.
  • The annual gift exclusion amount for gifts to non-US spouses has increased from $159,000 to $164,000 (there continues to be an unlimited exemption for gifts to US citizen spouses).

The maximum gift and estate tax rate remains at 40% of the fair market value of the relevant assets.

Additionally:

  • Life Insurance trust planning (effectively exempting policy death benefits from estate tax) remains unchanged
  • Family partnership gift planning remains (especially useful for US persons who have become deemed domiciled or even actually domiciled in the UK).
  • Statutorily authorised gifting arrangements such as grantor retained annuity trusts and charitable lead trusts remain available and are particularly attractive in low interest rate environments for US persons outside of the UK.

If you would like to discuss gift and estate planning opportunities, whether or not with a UK overlay, please get in touch with your usual Withers contact, or the author of this article.

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