Federal Estate and Gift Tax Exemptions to Shrink After 2025
By: Cindy Lott
Taxpayers in 2023 can make a lifetime transfer of assets out of their estate in the amount of $12.92 million for individuals and $25.84 million for couples. However, this heightened exemption level is expected to sunset at the end of 2025, rolling back to an estimated $6.8 to $7 million per person on January 1, 2026. Therefore, those looking to minimize their taxable estate should take the opportunity to gift cash, securities, and business interests out of their estate before the higher exemption ends.
The 2017 Tax and Job Cuts Act, along with subsequent IRS Regulations, promise no “claw back” if the exemptions are used before a law change is made to reduce the exclusion amount. This means you can transfer $12.92 million per person, and it will be protected permanently, even after the exemption is reduced.
Here are some planning options to consider:
- Trusts for children and grandchildren to use the exemptions, but preserve control and management of property by use of a trust
- A gift to a Spousal Lifetime Access Trust, which allows the beneficiary spouse to retain access to the trust assets during life
- Gifting cash by borrowing funds secured by assets you don’t want to gift (such as low basis real estate)
Good estate planning takes time to develop and implement. It also requires knowledge and agility to take advantage of time-limited opportunities like this one to shield more of your estate from taxation. Please reach out to your trusted BRC tax advisor if you have questions or wish to discuss other possible tax planning strategies.
The information contained in this article is for informative purposes only and should not be relied on when making any business, legal, or other decisions. This information may be updated without notice and/or may not contain the most current information that is available related to this topic. Please consult with your advisor to determine how this information applies to your specific facts and circumstances.