Estate Planning in 2024–2025: Prepare for the Sunset of High Exemptions

The estate and gift tax exemption is set to drop sharply after 2025, potentially exposing more families to estate taxes.

Act now to leverage the current $13.61 million exemption before it reverts to about $7 million per person.

Smart planning in 2024–2025 can help you protect your legacy and minimize taxes.

Big changes are coming to estate planning.

The generous estate, gift, and generation-skipping transfer (GST) tax exemptions—currently at historic highs—are scheduled to drop by half after December 31, 2025.

If you want to protect your wealth and minimize taxes for your heirs, now is the time to act.

What’s Happening With Estate Tax Exemptions?

• Current Law: In 2024, the federal estate and gift tax exemption is $13.61 million per person ($27.22 million for married couples).

• After 2025: Unless Congress acts, the exemption will revert to about $7 million per person (adjusted for inflation) on January 1, 2026.

• Why? The Tax Cuts and Jobs Act (TCJA) of 2017 temporarily doubled the exemption, but this provision “sunsets” at the end of 2025.

Example:  

A married couple with a $20 million estate can currently pass all assets tax-free. If the exemption drops, $6 million could be subject to a 40% estate tax—potentially costing $2.4 million.

Why Does This Matter?

• More Families Affected: The lower exemption could expose thousands more families to estate taxes.

• Limited Time: You have less than two years to use the higher exemption.

• No “Clawback”: The IRS confirmed gifts made under the higher exemption won’t be penalized if the exemption drops later.

Key Estate Planning Strategies for 2024–2025

1. Use Your Exemption Now

• Make large gifts to children, grandchildren, or trusts before 2026.

• Consider Spousal Lifetime Access Trusts (SLATs) to keep assets accessible.

2. Review and Update Your Estate Plan

• Check wills, trusts, and beneficiary designations.

• Update plans for blended families, special needs, or business succession.

3. Leverage Annual Gift Exclusions

• In 2024, you can give $18,000 per recipient ($36,000 per couple) tax-free.

4. Consider GST Planning

• Use the GST exemption for gifts to grandchildren or dynasty trusts.
  

5. Plan for State Estate Taxes

• Some states have lower exemptions—review your state’s rules.

What If Congress Extends the High Exemption?

• Congress could act to keep the higher exemption, but there’s no guarantee.

• Flexibility is key: draft documents now, but wait to finalize large transfers if you’re risk-averse.

Frequently Asked Questions (FAQ)

Q: What is the estate tax exemption for 2024?  

A: $13.61 million per person, $27.22 million for married couples.

Q: Will the exemption really drop in 2026?  

A: Unless Congress acts, yes—it will revert to about $7 million per person.

Q: Should I make large gifts now?  

A: If your estate is over $7 million ($14 million for couples), consider using the exemption before it drops.

Q: What happens if I gift now and the law changes?  

A: The IRS says there’s no clawback—gifts made under the higher exemption are safe.

Q: Do state estate taxes change too?  

A: No, state rules are separate. Some states have much lower exemptions.

Act Now to Protect Your Legacy

The window for using the high estate and gift tax exemption is closing fast. Review your estate plan, talk to your advisors, and consider making strategic gifts before the law changes. Proactive planning in 2024–2025 can save your family millions and ensure your wishes are honored.

Ready to get started?  

Contact an estate planning attorney or financial advisor today to discuss your options.