Time is of the essence when it comes to estate planning. In just a couple years, the estate and gift tax exemption amounts could be cut in half, resulting in the potential loss of millions in tax savings.
The Tax Cuts & Jobs Act of 2017 (TCJA) significantly increased the exemption amounts for gift and estate taxes until 2026. The estate and gift tax exemption amounts for 2023 are $12.92 million for individuals and $25.84 million per married couple. As a result of these higher exemption amounts, many people have not needed to be concerned with the federal estate tax.
That could soon change.
Beginning January 1, 2026, the estate and gift tax exemption amounts are set to revert to pre-TCJA amounts, with the individual exemption being $5 million and $10 million for married couples (these amounts will be adjusted for inflation).
Of course, Congress could act to extend the higher amount or institute a new amount, but the prudent move is to prepare now for what is known instead of banking on what could be.
While 2026 sounds like the distant future, the time to plan is now. It is always advisable to revisit your estate plans to ensure they are aligned with your current wishes and structured in the best way to protect you, your loved ones and your estate. With the changes coming by the end of 2025, financial advisors and estate attorneys are already facing backlogs working with clients in preparation. We recommend calling your CPA or estate attorney sooner than later to make sure time doesn’t run out.
You want to plan ahead to protect your assets and take advantage of these historical tax exemptions available through 2025, while minimizing the amount of estate taxes potentially due if no action is taken. Remember, the current estate tax is 40%. If you take action now and Congress lets the current exemption amounts expire in 2026, the IRS cannot claw back if you take the maximum exemption when they were at $25.84 million (per married couples). Do not wait, it is never too early to start estate planning!