Estate Planning 2022 Outlook

With the new year upon us, let’s discuss what the estate planning landscape will look like for the coming year and beyond.

Before I get too deep into the changes for the year and changes ahead, do you realize that ten years ago was 2012? The iPhone 4S was the hot product out there, and you could have purchased one Bitcoin for $6.74 (what a deal!). It doesn’t seem like a long time ago, but if it’s been more than 10 years since you’ve updated your estate plan, you are due for a review and possibly modifications.

First, federal estate tax (coupled with the lifetime gift tax credit) exemptions have increased again for 2022, with the new rate of $12.06 million per person. 40% is the still the highest tax rate for estates that are above this exemption. 

Next, in 2022, you now have an annual gifting exemption of $16,000 per person, a $1,000 increase from the last few years. As long as the gifts are $16,000 or under, they do not count towards your lifetime exemption.

Finally, Medicaid eligibility figures have slightly changed – a healthy spouse can now keep more funds ($137,400 max) and more income ($3,435 per month max). Medicaid eligibility itself can be tricky, and with proper planning and an attorney consultation, spouses can typically preserve more than the listed figures above.

The federal social spending legislation (Build Back Better) has been in the news continuously for the last year. Part of that legislation (there have been various versions) would increase taxes, and potentially increase estate taxes. This law, as of now, looks to be stalled. It does not mean that taxes won’t increase at some point this year–that’s certainly possible. But some of the proposals in 2021, including taxing capital gains upon death, massive increases in IRS enforcement, and a significant cut in estate tax exemptions, look to be off the table at the moment.

Later this year, we may see substantial SECURE Act regulations published by the IRS. Still uncertain, but these regulations would (hopefully) clarify issues that have arisen as a result of this new law. Stay tuned.

My best advice: Keep your plan updated regularly. A plan may need to be modified as laws change, but more importantly, your plan must stay up to date based on your individual situation–families change, finances change, goals change and more. 

Keep an eye out in this newsletter in the coming months for any changes in the laws.