Estate Planning Sunset: What’s Next for the Federal Estate and Gift Tax Exemption?

The Tax Cuts and Jobs Act (TCJA) significantly increased the federal estate and gift tax exemption, but that higher exemption is set to expire at the end of 2025—potentially dropping from $13.99 million (2025) to roughly $8 million (2026, adjusted for inflation). With this deadline approaching, high-net-worth individuals should consider estate planning strategies now.

What’s Changing?

• The TCJA exemption increase (2018-2025) is set to sunset in 2026, reverting to pre-TCJA levels.
• Taxable estates or gifts exceeding the exemption will still be taxed at 40%.
• Gift tax exclusions for 2025 allow $19,000 per recipient before impacting your lifetime exemption.
• Portability rules remain, letting a surviving spouse use any unused portion of their deceased spouse’s exemption.
• Anti-clawback provisions protect large gifts made before 2026 from being retroactively taxed under the lower exemption.

Election & Legislative Outlook

The 2024 election outcome may influence whether the higher exemption is extended:
✅ Republican-led Congress: Likely to extend or even increase the TCJA exemption.
❌ Democratic-led Congress (2026 midterms): Potential for stricter estate tax policies, but a presidential veto could block changes.

What Should You Do?

🔹 Review your estate plan to maximize tax-efficient wealth transfers.
🔹 Consider gifting strategies before the exemption drops in 2026.
🔹 Monitor state estate and inheritance tax laws, which may differ from federal rules.
🔹 Consult your tax and financial advisors for tailored estate planning strategies.

📌 Estate planning isn’t just for the wealthy! Even with a modest estate, a will and trust can protect your assets and ensure your wishes are followed.

Uncertainty is ahead—let’s plan for it. Contact us today to safeguard your legacy. 💼🔍

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