The existing federal gift and estate exemption thresholds remain in effect until the conclusion of 2025, but there are motivations to review your estate and tax plans earlier. Starting on January 1, 2026, the present lifetime estate, gift and generation skipping transfer tax exemptions, which stands at $12.92 million for 2023, will undergo a reduction of approximately 50%.
The 2017 Tax Cuts and Jobs Act (TCJA) had the effect of almost twofold increasing the lifetime estate, gift and generation skipping transfer tax exemptions, shifting it from $5.6 million for individuals and $11.18 million for couples to $11.18 million for individuals and $22.36 million for couples. Because the TCJA was passed by reconciliation and not subsequently made permanent, the exemption amounts are scheduled to revert back to the 2017 amount, about $5 million and adjusted for inflation, by the conclusion of 2025.
It’s important for families who are planning on transferring their wealth to be aware of these changes that might occur after 2025. It’s crucial to take a proactive approach in shaping the trajectory of your situation. Estate planning strategies and decisions should take into consideration the current laws as well as any potential changes that could impact their financial situation in the future. Gifting can be done with an eye toward shifting assets that are likely to experience high levels of appreciation. This can shield the appreciation of those assets from future estate taxation in your estate once the current exemption limits expire after 2025.
Please contact us to prepare for the future with the help of our team.
