Individuals and families who have a significant number of assets should be aware of possible estate tax changes coming this year. When the Tax Cuts and Jobs Act (TCJA) took effect in 2017, the federal estate tax exemption essentially doubled from $5.6 million per individual to $11.8 million per person, with annual inflation adjustments built in. However, these temporary federal estate tax exemptions are set to expire at the end of 2025, which means that the steep and sudden drop will likely affect your high-net-worth estate planning efforts. (Note: The Trump Administration has signaled their intention to extend the estate tax exemption, but those details still remain unclear at the time of this blog.) Currently, the estate tax sunset deadline approaches and is slated towards the end of 2025, making it important to be aware of the potential impact. It’s best to take action sooner rather than later in order to increase your chances of keeping your estate safe and secure. Enlisting the guidance of a highly skilled estate and tax planning attorney is the best way to access the customized support you need to make informed decisions about your future. Let’s take a closer look at what the current federal estate tax exemptions are, what happens if they expire, and some estate planning strategies you can explore to minimize the impact of the possible expiration of the TCJA exemptions.
Understanding the Current Federal Estate Tax Exemptions
First, it’s helpful to understand how the federal estate tax exemptions currently function and how they affect an individual’s estate planning considerations. According to the Internal Revenue Service (IRS), “Estates of descendants who die during 2025 have a basic exclusion amount of $13,990,000,” or roughly $27.98 million for married couples. Estates exceeding this threshold are taxed at 40 percent. Since the introduction of these high exemptions in 2017, many individuals and families have benefited from them in terms of wealth preservation and estate planning strategies.
Changes to the Federal Estate Tax Exemption in 2026?
If Congress does not act, the current estate tax exemptions will expire and drop to approximately half of where it currency stands (roughly $6.8 million per individual and $13.6 million per married couple, adjusted for inflation). The current 40 percent tax rate will remain, but more estates will become subject to taxation. Mass affluent individuals, business owners, and families with significant estate sizes will likely be affected by the TCJA estate tax exemption’s expiration. If you are concerned about how this deadline could affect your tax obligations and estate planning considerations, it may be worth discussing your unique needs with a highly experienced estate and tax lawyer who can help you identify the most strategic path forward.
Key Estate Planning Strategies
Many people are interested in learning more about how to reduce estate taxes in ways that support wealth preservation and ensure a strong and stable legacy. Below are just some of the estate planning strategies that you can explore with your caring and experienced estate planning attorney.
Lifetime Gifting
The current annual gift tax exclusion for 2025 is set at $19,000 per recipient. You can gift your loved one(s) this amount once per calendar year without subjecting these funds to tax obligations. Moreover, the process of gifting reduces the overall taxable value of your estate. You can learn more about incorporating lifetime gifting into your high-net-worth estate planning strategy by enlisting the guidance of a skilled estate tax attorney.
Trusts
Trusts can be especially effective wealth management and preservation tools for those with a significant number of assets. For example, you can choose to set up a grantor-retained annuity trust (GRAT) or a spousal lifetime access trust (SLAT) to help protect and preserve your wealth and keep it within your family. Moreover, trusts can be adjusted to accommodate your specific needs and goals for the future.
Charitable Giving Strategies
If you are passionate about giving back to your community or supporting a cause you care about, you can use charitable remainder trusts (CRTs) and donor-advised funds (DAFs) to minimize your estate tax liability while supporting a charitable cause. If you are interested in learning more about incorporating charitable giving into your estate plan, reach out to the dedicated legal team at Myatt & Bell, P.C., to discuss your goals.
Business Succession Planning
Individuals who have business interests can explore strategies for transferring these interests at reduced valuation before the current tax exemption expires. By putting these efforts in place before the 2026 deadline, you can reduce tax obligations and protect your current assets as much as possible.
Common Questions About Tax Planning
As the deadline approaches, a number of questions are sure to arise about the impact of the sudden drop in exemptions. Here is some information in response to some of the most frequently asked questions about the looming federal estate tax changes.
What Happens if I Don’t Do Anything?
If you do not take proactive steps, there will likely be a larger estate tax burden for your beneficiaries and heirs. In some cases, there may be a forced liquidation of assets, including family businesses or properties, in order to pay the considerable estate taxes. Additionally, there will be fewer tax-saving opportunities available if the current law expires.
Will Congress Extend the Current Estate Tax Exemption Limits?
Right now, there is no clear answer to this question. While lawmakers could pass legislation to extend or modify the exemption, there is no guarantee that this will happen. It’s best to plan as if the current exemption will be reduced.
What Happens if I Wait Until 2026 to Act?
If you wait until the deadline passes, you may miss out on key tax-saving opportunities. Depending on legislative changes, estate planning tools may become less effective or even more restrictive. If you’re ready to protect your loved ones and your legacy, we encourage you to schedule a Myatt & Bell estate planning consultation at your earliest convenience to learn more about your estate planning and wealth preservation options.
It’s never too soon to plan for the future. If you are interested in learning more about your estate planning and wealth preservation options, the dedicated legal team at Myatt & Bell, P.C. is available to provide you with the customized guidance you need to make informed decisions with greater confidence. Please call our Vancouver, Washington office at (360) 360-0212 or our Portland, Oregon office at (503) 641-6262 today to get started.
The content on this blog is for general informational purposes only and does not constitute legal advice. The author of this blog is not an attorney, and the views expressed are solely those of the author. Always seek the advice of a qualified attorney for legal guidance regarding your unique situation.
