Donald Trump’s 2024 election victory and the Republican Party’s control of Congress signal significant implications for estate tax planning. With the potential extension of the 2017 Tax Cuts and Jobs Act (TCJA) on the horizon, individuals and families should consider how these changes may affect their long-term financial plans. The historically high federal estate tax exemption, which currently stands at $13.61 million per individual, is likely to remain in place, but uncertainty still looms regarding other tax provisions.
At Estate Planning Pros, we recognize the importance of timely planning to protect your assets and legacy. Consulting with an estate tax planning lawyer can help you better prepare for the potential changes ahead.
The Estate Tax Exemption And Its Likely Extension
The current estate tax exemption, established under the TCJA, has provided families with a unique opportunity to transfer wealth without significant tax burdens. However, this exemption is set to expire at the end of 2025, potentially reverting to a much lower threshold of approximately $5 million per individual.
With Republicans now in control of the White House and Congress, the likelihood of extending the current exemption has increased. While this is encouraging news for many, the situation is not without challenges. Legislative hurdles, including the Senate’s filibuster rules, mean that any extension would likely require compromises or additional provisions.
Families with significant wealth should take this opportunity to evaluate their estate plans. For those who have not yet taken advantage of the current exemption, it may be time to explore strategies such as gifting to irrevocable trusts or establishing spousal lifetime access trusts (SLATs). These tools allow for the tax-efficient transfer of assets while the exemption remains at historically high levels.
State-Level Considerations
While the federal estate tax exemption garners much attention, it’s essential to consider the impact of state-level taxes. Many states impose their own estate or inheritance taxes, often with lower exemption thresholds than the federal government.
For instance, a family living in a state with a $1 million exemption could face substantial state taxes on a sizable estate, even if it falls under the federal threshold. Trust planning and gifting strategies can help mitigate these state-level liabilities.
At Estate Planning Pros, we frequently work with families to address both federal and state-level considerations. With proper planning, you can reduce the overall tax burden and preserve more of your wealth for future generations.
Planning Beyond Taxes
While much of the focus is on tax-related strategies, estate planning is about more than minimizing taxes. It’s also an opportunity to reflect on how your wealth will impact your loved ones and ensure that your wishes are honored.
For example, setting up a trust not only protects assets from taxation but also provides clear guidelines for how and when your beneficiaries will receive them. This can be particularly important for families with young children, blended families, or those who wish to support charitable causes.
Additionally, reviewing foundational documents like wills and healthcare powers of attorney can provide peace of mind. Life changes, such as divorce or the loss of a spouse, may necessitate updates to these critical documents.
Taking The First Step
Estate tax planning often feels overwhelming, especially during times of political and legislative uncertainty. However, the most important thing is to start. Whether you’re creating a plan for the first time or revisiting an existing one, taking action now can save your family unnecessary stress and financial loss in the future.
If you’re ready to explore your options, an estate tax planning lawyer can guide you through the process and tailor a plan to your unique needs. At Estate Planning Pros, we connect individuals and families with experienced attorneys who can help secure their financial legacy.