From the IRS’s release of the 2024 lifetime exemption

In our November 2023 review of current developments, we’ve observed significant changes in estate planning, elder law, and business law. These developments encompass a range of topics, from the Internal Revenue Service’s release of the 2024 lifetime exemption and annual gift exclusion amounts to the Social Security Administration’s announcement of 2024 cost-of-living adjustments. Additionally, there is a new final rule regarding the use of FinCEN identifiers under the Corporate Transparency Act. We’ve summarized some key developments and analyzed their potential impacts on estate planning, elder law, and business law practices.

Estate Planning:

Internal Revenue Service Releases 2024 Lifetime Exemption and Annual Gift Exclusion Amounts:

On November 9, 2023, the IRS issued Revenue Procedure 2023-34, which includes the annual inflation adjustments for tax provisions applicable to individual taxpayers in 2024. Notable adjustments include:

• The estate, gift, and generation-skipping transfer tax exemption amount for 2024 is $13,610,000, up from $12,920,000 in 2023.
• The annual exclusion for gifts in 2024 is $18,000, compared to $17,000 in 2023.
• Gifts of up to $185,000 to a non-citizen spouse in 2024 are not included in the taxable gift amount, an increase from $175,000 in 2023.

These adjustments reflect ongoing inflation trends and offer estate planning opportunities. However, it’s essential to consider the expiration of the increased exemption amount at the end of 2025.

Massachusetts Doubles Its Estate Tax Exemption Amount:

Massachusetts Governor Maura Healey signed an Act on October 4, 2023, increasing the state’s estate tax exemption to $2 million for decedents who passed away on or after January 1, 2023. This change provides significant tax relief, and estate planning attorneys should advise affected clients to adjust their estate plans accordingly.

California Adopts Uniform Directed Trust Act:

On October 10, 2023, Governor Gavin Newsom signed the California Uniform Directed Trust Act, defining trust directors’ and directed trustees’ roles and responsibilities. This law offers flexibility and fiduciary protection within trust structures.

Trust Exempt from Realty Transfer Tax After Retroactive Modification:

The Ebersole case highlights the strategic use of retroactive amendments to revocable living trusts (RLTs) to qualify for tax exemptions, specifically when transferring real property to the trust.

Estate Planning/Elder Law and Special Needs Law:

Policy Owner Must Strictly Comply with Terms of Life Insurance Policy to Change Beneficiary Designation:

The American General Life Ins. Co. v. O.H.M. case underscores the importance of adhering to policy terms when changing beneficiary designations to avoid disputes and ensure proper asset distribution.

Social Security Administration Announces Cost-of-Living Adjustments for 2024:

The Social Security Administration’s 3.2 percent cost-of-living adjustment for 2024 benefits recipients, helping them combat the effects of inflation. This adjustment can impact estate planning strategies for seniors on fixed incomes.

Business Law:

FinCEN Issues Final Rule on Reporting Companies’ Use of Unique Identifying Numbers for Beneficial Owner Reports:

The final rule issued on November 7, 2023, provides guidance on using FinCEN identifiers in place of individual beneficiary information for certain related entities under the Corporate Transparency Act (CTA). This change simplifies reporting for millions of small businesses subject to CTA requirements.

Internal Revenue Service Provides Withdrawal Process for Employee Retention Credit Claims:

Employers pressured into filing Employee Retention Credit (ERC) claims now have the option to withdraw these claims if they haven’t received a refund. This provides relief to those who may have filed erroneous claims.

California Enacts New Employment-Related Laws:

California has passed several employment-related bills effective January 1, 2024. Notable changes include increased paid sick leave requirements, unpaid leave for reproductive-related losses, and a prohibition on noncompete agreements.

These developments have significant implications for practitioners in the fields of estate planning, elder law, special needs law, and business law. Staying informed and adapting to these changes is essential to providing effective legal counsel to clients.