Looming Changes to Federal Estate & Gift Tax – Act Now!

By Charles E. Telford III

March 13, 2024 | Trusts and Estates Blog

Following the enactment of the Tax Cuts and Jobs Act in 2017, the federal estate and gift tax exemption was increased from $5.49 million per person to $11.18 million, which allowed for a substantial increase in what taxpayers were allowed to transfer both during their lifetime and posthumously, without triggering federal estate or gift taxes. Currently at $13.61 million for individuals or over $27 million for couples with inflation adjustments, this expansion was particularly beneficial for those with sizable estates. However, this provision is set to expire on December 31, 2025, reverting back to 2017 levels unless Congress intervenes. 

Starting January 1, 2026, the exemption is poised to decrease by half to $6.81 million ($13.6 million for couples), potentially subjecting estates above this threshold to a 40% estate tax rate on the surplus. 

These impending changes prompt reconsideration of existing estate plans, especially for individuals who took advantage of the increased gift exclusion. The IRS has clarified that those utilizing the increased gift tax exclusion from 2018 to 2025 won't face adverse consequences post-2025 when the exclusion drops to pre-2018 levels. 

Navigating this complex landscape necessitates comprehensive planning, including adjustments to account for federal legislation that may impact estate plans. It's crucial for individuals to assess their circumstances meticulously and make necessary changes accordingly. 

At Lippes Mathias, our Trust & Estate team is proactively assisting high-net-worth clients in adapting to these impending changes. Feel free to reach out to us with any concerns regarding the potential shift in the estate and gift tax exemption or any other inquiries. 

Disclaimer: The information in this post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from our firm or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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