As we enter 2025, several important updates to tax exemptions are worth noting for your estate planning. Here's a quick breakdown:

Federal Estate Exemption: $13.99 Million. The federal estate tax exemption increases to $13.99 million per person in 2025. For married couples, this means up to $27.98 million can be transferred tax-free. This exemption is only applicable to US Citizens, those with permanent residence in the United States, and some G4-Visa holders who are considered residents. For G4-Visa holders considered non-residents, the federal estate exemption remains at $60,000.

Annual Gift Exclusion: $19,000. The annual gift tax exclusion rises to $19,000 per recipient, allowing for more generous tax-free gifts to family and friends. For married couples, this allows for $38,000 to be gifted to a single person.

Gifts to Non-Citizen Spouses: $190,000. The tax-free gift limit to a non-citizen spouse increases to $190,000, offering more flexibility for wealth transfers.

Maryland Estate Tax Exemption: $5 Million. Maryland's estate tax exemption remains at $5 million for 2025, giving residents more room to pass on wealth without facing estate taxes.

D.C. Estate Tax Exemption: $4,873,200. The exemption for D.C. residents increases to $4,873,200, providing more space for tax-free transfers.

The increased exemptions create important planning opportunities. While the federal exemption may decrease in 2026 to $5 million (adjusted for inflation), there is still uncertainty about whether Congress will allow this change to take effect or extend the higher exemption. Given the current political landscape, it's possible that the larger exemption could be maintained, but regardless of the outcome, now is the time to take action. Whether through strategic gifting or revising your estate plan, acting sooner rather than later will help you make the most of these favorable limits. For personalized advice on how these changes impact your planning, don't hesitate to reach out.

Navigating international estate planning can be complex, especially when it comes to understanding how estate tax treaties can affect your estate. To make this easier, we've created a chart outlining countries with estate tax treaty exemptions.

If you have any questions or need personalized advice, don't hesitate to contact us. We're here to help you navigate the complexities of international estate planning with confidence.

Property scams are becoming increasingly sophisticated, preying on unsuspecting individuals through cleverly disguised letters. One such scam that has surfaced recently targets homeowners, promising to retrieve their newly recorded property deeds for a fee. This deceptive practice not only drains your finances, but also puts your personal information at risk.

Once your deed is recorded, you may receive a notice in the mail that looks official, claiming to offer a service to retrieve your property deed for a fee. At first glance, it might seem legitimate, especially if it includes accurate details about your property. However, these notices are often crafted to mislead recipients into believing they need to pay for a service that is either unnecessary or freely available through legitimate channels.

The clients at Verstegen & Fobe always receive a copy of their recorded deed after their signing. Should you ever lose it and need a copy, the staff here would be pleased to retrieve it for you.

New Development: Until 2023, Vermont's Death with Dignity Act required patients seeking physician-assisted suicide to be a Vermont resident. Meaning that terminally ill patients from other states could not travel to Vermont to access this option.

In 2023, Vermont amended its Death with Dignity Act to remove the residency requirement, making it the first state to allow non-residents to access physician-assisted dying. This landmark change has significant implications for patients across the country who are seeking end-of-life options.

For those engaged in estate and advance directive planning, this development highlights the importance of ensuring your healthcare documents reflect your wishes and are valid across state lines. Contact our office if you have questions about how these changes may affect your planning.

As of October 1, 2022, Title 18, Supported Decision-Making Agreement ("SDMA"), was enacted in Maryland (Md. Code, Est. & Trusts § 18-107). Maryland joins 20 other states, including the District of Columbia (D.C. Official Code §§ 7-2131 to 7-2134), that have passed similar laws honoring supported decision-making agreements.

An SDMA empowers persons with disabilities to make their own decisions with the help of a trusted supporter. It is a formal agreement recognizing the supporter as an authority to guide and assist the individual. Unlike traditional approaches such as adult guardianship, financial power of attorney, and advance medical directives, an SDMA allows individuals to retain their rights and control over their own lives.

What does all this mean for those looking to create an SDMA? Unlike adult guardianship, an SDMA is neither a way for a third party to gain authority over an individual nor an instrument in which a person with disabilities hands over his or her rights to make decisions. For example, under adult guardianship, individuals can be stripped of their property rights and decision rights, i.e., healthcare decisions, where they live, etc. What the states with SDMA have done is afford those with disabilities who have historically been controlled by their guardians an opportunity to act for themselves.

Currently, Virginia has not passed a law regarding SDMA but has begun the legislative process.

As of February 23, 2023, the District of Columbia's Uniform Power of Attorney Act of 2021 has come into effect. This amendment to Title 21 of the D.C. Code has introduced a new Statutory Power of Attorney ("SPA") form under § 21–2603.01. The primary objective of this new form is to "clarify the fiduciary duties of agents to their principals and protect individuals creating powers of attorney against fraud. It also provides protections from third parties who deal with agents exercising powers of attorney and it creates a uniform statutory form to create a power of attorney" (DC Council).

It is important to note that any SPA signed before February 23, 2023, using the repealed § 21–2101 form is still valid. If you have signed an SPA after February 23, 2023, however, you will need to update your form. For this we encourage you to contact Verstegen & Fobe. We would be more than happy to assist you in resolving this matter.

Finally, a silver lining to all that inflation. Beginning January 1, 2023, the FEDERAL GIFT and ESTATE TAX EXEMPTION increased over $860,000 leaving the total exemption amount at $12,920,000. This also sets the stage for experienced estate planners to double that exemption to $25,840,000! However, this number is a temporary increase due to the exemption slated to lapse on January 1, 2026.

While these exemptions apply to U.S. citizens and those domiciled within the United States, GIFTS FOR NON-CITIZEN SPOUSES also increased to $175,000 up from $164,000. Another exemption at the federal level was the annual federal gift tax exclusion for gifts to an unlimited number of individuals. Keeping with the current trend the exemption amount has increased by $1,000 for the second year in a row and now stands at $17,000. Additionally, married couples, while able to freely gift to each other gift tax-free, can utilize this exemption to "gift split" meaning each spouse could give $17,000 to the same person.

Amounts have also changed at the state level. The STATE ESTATE TAX EXEMPTION for the DISTRICT OF COLUMBIA, adjusted annually for the cost of living, increased up to $4,594,000. Fortunately, in VIRGINIA, the legislature still has yet to pass an estate tax. Finally, in MARYLAND, the estate tax exemption remains flat at $5,000,000.

What better time than now to call your estate planner and make sure to maximize your exemptions.

Note: In September 2020, the mayor of the District of Columbia signed the "Estate Tax Adjustment Amendment Act of 2020" into law. This act reduced the estate tax exemption from $5,762,400 to $4 million in 2021. Each year, the exemption will be adjusted to reflect increases in the cost of living. For 2023, the exemption is expected to be set at approximately $4,594,000.

Tax policy is a hotly debated topic right now across the country. In Washington, Democrats scramble to undo the tax rates put into place by President Donald Trump, which many argue are unfairly favorable to the wealthy. On March 25, 2021 Senator Bernie Sanders proposed a new bill which would raise estate tax rates immensely. If the bill is passed, the following rates would be put into place:

Estates worth $3.5 million to $10 million: taxed at 45%. Estates worth $10 million to $50 million: taxed at 50%. Estates worth $50 million to $1 billion: taxed at 55%. Estates worth more than $1 billion: taxed at 77%.

Sanders' plan will allegedly only affect the top 0.5% of Americans, but Sanders' staffers reported to the Post that it will bring in $315 billion over the next 10 years. While Senator Sanders is trying to restore estate tax rates to 1970 levels, the Republicans are working hard in the opposite direction. Senators Mitch McConnell and John Thune introduced their own bill which would repeal the estate tax completely. The Death Tax Repeal Act of 2021 has the support of nearly 150 lawmakers in Congress as well as many agricultural groups.

The Republicans argue that the bill is essential to provide relief to more than 74,000 farms around the country currently at risk. Estate taxes present a heavy burden to the agricultural community because taxes are based on the market value of the land. Therefore, in order to pay taxes these families often are forced to liquidate and risk losing their business entirely. The bills' supporters caution that the collapse of the farming industry will, in turn, have a massively negative impact on the United States economy as a whole.

With both sides unwilling to budge, it is unlikely a compromise can be reached between the Democrats and Republicans.

The 2020 federal estate tax exemption is $11.58 million for individuals or, $23.16 million for married couples with a flat rate of 40% on assets exceeding the exemption at death. In 2021, the exemption amount is set to rise to $11.7 million for individuals, or $23.4 million for married couples (with appropriate estate planning measures in place). However, under the Biden Administration this could change significantly.

The Biden Administration has proposed cutting the estate tax exemption back to the 2009 level of $3.5 million for individuals or, $7 million for married couples and raising the tax from 40% to 45%! The annual gift tax exemption is to remain the same, at $15,000 per person. Gifts to U.S. citizen spouses remain unlimited. However, annual gifts to non-citizen spouses (e.g. G-4 visa holders, permanent residents) will be limited to $159,000 starting in 2021, up from $157,000 in 2020.

This means that if the annual gift tax exemption has been exceeded, the donors (persons making the gift) will be required to file IRS Form 709 (Gift tax return) and report the gift. They will either pay gift tax or reduce the donor's estate tax exemption by the amount of the gift. The current lifetime gift tax exemption is the same as the $11.7 million federal estate tax exemption. This all could change with the Biden Administration proposing to cap the lifetime gift tax exemption to $1 million.

The Biden proposals would require Congressional support and thus will not be decided until all runoff elections are completed in January 2021. The impact of the proposed changes will impact existing estate plans immensely, and may require some significant amendments.