As someone who has worked hard to build wealth and create a legacy, you want to make sure that your assets are protected and your loved ones are taken care of after you’re gone. The federal estate tax exemption is a powerful tool that can help you do just that.
In 2024, the exemption amount has hit an all-time high of $13.61 million per individual, or $27.22 million for married couples. That means you can transfer a significant portion of your estate to your heirs without having to worry about Uncle Sam taking a big bite out of it.
But here’s the thing: just because you have this exemption doesn’t mean you can sit back and relax. Estate planning is all about being proactive and making smart decisions now to set yourself and your family up for success down the road.
The federal estate tax exemption is the amount of assets you can pass on to your beneficiaries without triggering federal estate taxes. Think of it as a “get out of tax free” card for your estate.
The exemption amount is adjusted each year to keep up with inflation, and in 2024, it’s higher than ever before. To put it in perspective, if you were to pass away this year with an estate worth $15 million, only $1.39 million would be subject to federal estate taxes. The first $13.61 million is completely shielded, thanks to the exemption.
In addition to the federal estate tax exemption, the annual gift tax exclusion allows you to give up to $18,000 per recipient each year without eating into your lifetime gift and estate tax exemption.
Let’s say you have three adult children, and you want to start transferring some of your wealth to them now. You can give each of them $18,000 in 2024 without using any of your $13.61 million exemption. Do that every year, and you can significantly reduce the size of your taxable estate over time.
Of course, if your estate is valued above the exemption amount, you’ll want to know what kind of tax rates you’re looking at. As of 2024, estates that exceed the exemption are subject to the following rates:
| Taxable Estate Value | Estate Tax Rate |
|---|---|
| $0 to $10,000 | 18% |
| $10,001 to $20,000 | 20% |
| $20,001 to $40,000 | 22% |
| $40,001 to $60,000 | 24% |
| $60,001 to $80,000 | 26% |
| $80,001 to $100,000 | 28% |
| $100,001 to $150,000 | 30% |
| $150,001 to $250,000 | 32% |
| $250,001 to $500,000 | 34% |
| $500,001 to $750,000 | 37% |
| $750,001 to $1 million | 39% |
| More than $1 million | 40% |
As you can see, estates valued at more than $1 million above the exemption amount are taxed at a whopping 40%. That’s why it’s so important to have a solid estate plan in place to minimize the tax burden on your heirs.
At Johnson Legal, PLLC, we’ve seen firsthand how effective estate planning strategies can help our clients keep more of their hard-earned wealth in the family.
Some of our go-to techniques include:
We’ve seen these strategies work wonders for our clients. By staying under the exemption amount, you could completely avoid federal estate taxes.
Now, here’s the catch: the current $13.61 million exemption is set to sunset, or revert, to the base amount of $5 million (adjusted for inflation) at the end of 2025. Unless Congress steps in to extend the higher exemption, you’ll have a smaller exemption to work with in 2026.
To make the most of the increased exemption while it’s still around, our team at Johnson Legal, PLLC, recommends taking these steps:
By being proactive now, you can minimize the impact of the exemption sunset and keep more of your wealth in the family.
While North Carolina doesn’t impose its own estate or inheritance tax, some states do, and their exemption amounts are often much lower than the federal exemption. This means that if you own property or assets in those states, your estate could be subject to significant state-level taxes, even if it falls below the federal exemption amount.
If you’re a North Carolina resident with property or assets in states that impose estate or inheritance taxes, it’s crucial to work with attorneys who understand the nuances of those states’ laws and how they interact with your overall estate plan.
At Johnson Legal, PLLC, we have experience helping clients understand the complexities of multi-state estate planning, ensuring that their assets are protected and their beneficiaries aren’t saddled with an unexpected tax burden.
The increased federal estate tax exemption in 2024 is a huge opportunity for you to protect your assets and minimize your tax liability. By understanding how the exemption works, using smart gift and estate tax strategies, and planning for the upcoming exemption sunset, you can make the most of this valuable tax benefit and secure your legacy for generations to come.
At Johnson Legal, PLLC, we’re here to help you do just that. Our attorneys are dedicated to helping clients in Wilmington, NC, and the surrounding areas create comprehensive estate plans that take advantage of all the latest tax benefits and strategies. We’ll work with you to create a personalized plan that fits your unique needs and goals so you can have peace of mind knowing your hard-earned wealth is protected.
Don’t wait until it’s too late to start planning for the future. Contact Johnson Legal, PLLC today to schedule a consultation and take the first step in creating an estate plan that works for you and your family.
Shane T. Johnson is the CEO and Managing Partner of Johnson Legal, an estate planning and business law firm in Wilmington, NC. With years of experience in estate and business law, he has zealously represented clients in various legal matters, including small business formation and purchasing, estate planning, probate, domestic violence, and other legal cases.
Shane received his Juris Doctor from the University of Wyoming and is a member of the North Carolina Bar Association. He has received numerous accolades for her work, including being named among the Best Probate Lawyers in Wilmington by Expertise.com.
