This question comes up all the time: “Couldn't I just make a will online, transfer…
Asset transfers between individuals or estates are considered taxable events by the Internal Revenue Service. These taxes are often referred to as gift taxes and estate taxes. They include any asset such as cash and property. The good news is the IRS has tax exemptions for these taxes. Only transfers of high value, a small percentage of all gift and estate transfers, actually trigger paying money to the IRS.
The tax exemption limits for gifts and estate transfers for gifts and estate change depending on current politics and policies. Many people thought these limits would decrease in 2022 due to the Build Back Better Act, meaning smaller gifts and estate transfers would have been taxed. In fact, the limits increased in 2022, and the higher rates will stay that way through 2026. In 2026 the tax exemptions are scheduled to revert to following the 2012 Act levels.
This increase allows higher net-worth individuals to shelter assets from tax consequences in their estate planning strategies through 2026. A gift tax is paid by the person giving the gift, and the estate pays the estate tax before it transfers to the heirs. Please note that these taxes and exemptions are federal. Some states may have additional taxes and exemptions.