With the 2017 Tax Cuts and Jobs Act set to expire on December 31, 2025, and new political leadership in Washington, estate tax planning has become more critical than ever. For families and individuals with significant wealth, understanding the impact of the upcoming changes and taking proactive steps now can make a significant difference. The federal estate tax exemption, currently at $13.61 million, may be reduced in the future, creating a limited window to take advantage of the current favorable rates.
At Estate Planning Pros, we’ve seen how proper planning can help families protect their wealth and minimize tax burdens. Working with an estate tax planning lawyer can be a valuable step to ensure your assets are managed effectively under changing laws.
The Importance Of Acting Now
The expiration of the current estate tax exemption is one of the most pressing issues for high-net-worth families. After 2025, unless Congress acts, the exemption could revert to $5 million, adjusted for inflation. This potential reduction has prompted many families to accelerate their gifting strategies.
Some couples, particularly those with estates valued at over $50 million, have already taken advantage of the high exemption by transferring $26 million into irrevocable trusts. These trusts are a powerful tool to preserve wealth and remove assets from the taxable estate. However, even families with smaller estates can benefit from early planning. Setting up a spousal lifetime access trust (SLAT) or gifting smaller amounts to stand-by trusts allows families to start the process while keeping options open as laws evolve.
Challenges In Extending Current Tax Laws
Although Republicans currently control both houses of Congress and the White House, extending the 2017 tax law faces procedural and political hurdles. The budget reconciliation process, likely required to pass any extension, comes with limitations, such as the Byrd Rule, which caps tax reductions at a 10-year lifespan unless broader bipartisan support is secured.
For individuals considering large gifts or trust arrangements, this uncertainty highlights the importance of acting now. Waiting until the last minute could mean missing the chance to transfer significant wealth under today’s favorable tax structure.
Gifting Strategies To Maximize Tax Savings
One of the most effective strategies under the current law is utilizing the full estate tax exemption before it sunsets. Families with substantial assets can gift up to $13.61 million per individual to irrevocable trusts, reducing the size of their taxable estates. These trusts, such as SLATs, provide flexibility while ensuring assets are protected for future generations.
Even for estates valued between $20 million and $50 million, smaller initial gifts to stand-by trusts can help families ease into the process. For instance, gifting $1 million to a trust allows families to see the benefits of transferring wealth while retaining the option to expand their strategy later.
Additionally, state estate taxes should not be overlooked. Gifting can also reduce exposure to state-level taxes, which are not impacted by federal exemptions. This is particularly relevant for individuals living in states with their own estate tax thresholds.
Proactive Planning Builds Confidence
Estate planning is about more than numbers—it’s about creating peace of mind for you and your loved ones. Knowing that your wealth is protected, no matter what changes lie ahead, can relieve stress and allow you to focus on what truly matters.
At Estate Planning Pros, we connect individuals and families with trusted attorneys who understand the nuances of estate tax law. Working with an estate tax planning lawyer can help you design a strategy that aligns with your goals and adapts to future changes in the law.
Protect Your Legacy Today
The uncertainty surrounding estate tax laws makes proactive planning more important than ever. Whether you’re ready to start gifting, establish trusts, or explore other strategies, taking action now can save your family significant financial and emotional costs down the road.
Contact Estate Planning Pros today to find a knowledgeable estate tax planning lawyer who can guide you through this critical process. Let’s work together to protect your legacy and give you peace of mind for the future.