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The 2024 changes in generation-skipping transfer taxes

On Behalf of | Apr 22, 2024 | Estate Planning

Skipping a generation when transferring your assets can prevent paying the federal estate taxes twice. However, this process is not entirely tax-exempt. A generation-skipping transfer tax applies to transfers to relatives more than one generation younger and gifts to non-relatives more than 37.5 years younger than you.

Changes to the laws in 2024 affect how you transfer your property to your families while minimizing taxes.

2024 changes to the GST tax

The main modification to the GST tax is an increase in the exemption amount. It is now $13,610,000 per taxpayer. You can give away assets up to this new limit to grandchildren or other beneficiaries without paying GST taxes. The federal estate, gift and GST tax rate on the excess remains unchanged.

Other noteworthy changes include:

  • An increase to the federal gift tax annual exclusion amount from $17,000 to $18,000
  • An increase to the exclusion for gifts to non-citizen spouses from $175,000 to $185,000
  • The new limits on how much money you can inherit without having to pay federal taxes will only be in effect until December 25, 2025

If the laws stay the same, the amount of money a person can give away without paying these taxes will return to around $6.5 to $7 million per person from the current $11.7 million.

Implications for estate planning

Understanding these changes helps with estate planning strategies. The higher exemption amount gives you greater flexibility in structuring your estate. It provides ways to minimize tax liabilities for future generations. It is important to reassess existing plans to capitalize on these updated thresholds.

The heightened GST tax exemption presents opportunities and challenges for affluent families in California. It is important to keep up-to-date with tax rules and make changes to your estate plan as needed. Knowing how to navigate complex tax laws can help you safeguard your assets for loved ones.