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2022 Estate Tax and Gift Update Federal and State

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Federal Estate Tax Amount for 2022

The IRS released Revenue Procedure 2021-45 which announces the increase in 2022 of the estate, gift and generation-skipping transfer tax applicable exclusion amounts from $11.7 million to $12.06 million. The applicable exclusion amounts currently remain scheduled to expire on December 31, 2025, which would result in a reduction in the exclusion amounts to $5 million (adjusted for inflation). However, there is always a possibility that new law will be passed that could adjust these exclusion amounts sooner.

Federal Gift Tax Exclusion for 2022

In addition, in 2022, the gift tax annual exclusion amount for gifts to any person (other than gifts of future interests to trusts) will increase to $16,000, while the gift tax annual exclusion amount for gifts to a non-citizen spouse will increase to $164,000.

Rhode Island Estate Tax Update for 2022

Because of an inflation adjustment prescribed by statute, the Rhode Island estate tax credit amount will be $74,300 for decedents dying on or after January 1, 2022, up from the current credit amount of $70,490 (which applies for decedents dying in calendar year 2021).

As a result, the Rhode Island estate tax threshold will be $1,648,611 for decedents dying on or after January 1, 2022, up from the current threshold of $1,595,156 (which applies for decedents dying in calendar year 2021).

Thus, in general, for a decedent dying in 2022, a net taxable estate valued at $1,648,611 or less will not be subject to Rhode Island’s estate tax. Due to the inflation adjustment, fewer estates will be
subject to Rhode Island’s estate tax in 2022. (In certain circumstances, the Rhode Island estate tax will not apply regardless of the estate’s size: Rhode Island General Laws Chapter 44-22 provides full details on the computation of the tax, including such factors as the marital and charitable deductions.)

◼ ESTATE TAX – NEW FORM
A new Rhode Island estate tax form will be used starting January 1, 2022. It’s Form RI706. Form RI-706 will replace Form RI-100A and Form RI-100 for all Rhode Island estate
tax filings.

Until January 1, 2022, there are two main estate tax forms: Form RI-100 (typically used for estates that are not over the applicable estate tax threshold) or Form RI-100A (typically used for estates that are over the applicable estate tax threshold).

Effective January 1, 2022, Form RI-706 becomes the main estate tax form, essentially combining Form RI-100 and Form RI-100A into one unit. Each estate valued at more
than $1.3 million must complete the entire Form RI-706. Each estate valued at below $1.3 million are only required to complete portions of pages 1 through 4 of the form.

▪ On and after January 1, 2022, use Form RI-706 for all estates with a date of death on or after January 1, 2015.

▪ Before January 1, 2022, use Form RI-100A or Form RI-100 (whichever applies) for estates with a date of death on or after January 1, 2015.

▪ The $50 filing fee still applies for each estate return filed on or after January 1, 2022, including those returns filed for estate tax lien release.

▪ All other estate tax forms (including the extension form, lien release form, and payment voucher) remain the same.

A Brief History on Estate Taxation

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The First Tax

Levies on the post-mortem transfer of property originated in Egypt around 700 BC, according to a IRS history They were later imposed, around the time of Christ, by the Roman emperor Caesar Augustus, and then by feudal lords in Europe. America’s first death tax—that’s what it was officially called—was imposed as part of the Stamp Act of 1797 to cover the cost of US military skirmishes with France. The federal government charged 25 cents on postmortem bequests of $50 to $100, 50 cents on $100 to $500, and $1 on each additional $500.

Congress enacted a second round of death taxes in the Revenue Act of 1862 to raise funds for the Union to fight the Civil War. Lawmakers did so again in 1898 to bankroll the Spanish-American War. These taxes were not burdensome. In the latter case, if a wealthy man left behind $10 million—a staggering fortune—to a sibling, child, or grandchild, his estate owed the government just over 2 percent, about $219,000. All three taxes were repealed after the hostilities ceased.

By the late 1800s, however, America was transitioning rapidly from an agrarian economy to an industrial one. The old federal patchwork of tariffs and property taxes was leaving the fortunes of Gilded Age industrialists like Andrew Carnegie and John D. Rockefeller largely untouched. Reformers began calling upon the government to tax these “robber barons,” while the businessmen, as today, countered that such a move would stifle growth and quash innovation. The Revenue Act of 1916, in anticipation of the coming war effort, levied a tax of up to 10 percent on inheritances of $50,000 or more (about $1.1 million today); the levy was increased to 25 percent the following year, although it was later repealed. But Rockefeller never paid a penny. He just signed his fortune over to his son before he died, because Congress hadn’t yet passed a gift tax.

Modern Day

It wasn’t until 1976, after another six decades of tweaks, that Congress finally put in place a comprehensive, integrated gift-and-estate tax similar to what we have today. But the endless squabbling over the estate tax, which was expected to bring in just $16 billion last year, continues to this day.

Do you or a loved one need to discuss the impact estate taxes may have on your Estate? Call us for a no-obligation consultation.