For the estate of a US citizen or domicile who makes taxable gifts or passes away in the 2023 calendar year, the lifetime exclusion available against the estate or gift tax is $12,920,000, increasing to $13,610,000 in 2024.
Bearing in mind that the exclusion amount is scheduled to reduce to pre-2018 levels after 2025, and the IRS has confirmed that individuals taking advantage of the increased levels for 2018 to 2025 will not be inversely impacted after 2025, 2023 is a good time to take advantage of gifting opportunities before the exclusion decreases.
Remember that gifts to US charitable trusts could be deemed to be a settlement for UK tax purposes, assuming the settlor is considered UK domiciled, which could create UK tax issues.
What should you do?
There’s potential for you to make tax-efficient gifts before the 2023 year end. For example, you could make a gift of up to $17,000 ($18,000 In 2024), per donee, per donor, and not use up the current $12,920,000 Estate Tax threshold.
You may also want to follow through with any tax planning that involves using up the lifetime exemption amount before it reduces in a few years’ time.
Get in touch for advice on obtaining US/UK tax relief on charitable contributions and minimising any UK Inheritance Tax on a settlement into a trust.