Estate Planning Tips for the 2025 “Death Tax” Exception Sunset:

Offset the Estate Tax Exemption’s Impact on Your Legacy Plan 

As financial landscapes evolve, so do tax laws, and the sunset of the estate tax (AKA the “Death tax” or “Wealth Tax”) exemption is no exception. The potential changes in exemption levels scheduled for 2025 can have a profound impact on estate plan, your legacy, and your family. The Federal Estate tax rate is 40%! Currently, the exemption limits are $12.92 million for individuals and $25.84 million for married couples. Meaning for every dollar someone inherits over that federal limit, 40 cents will be taken in taxes. Effective January 1, 2026, the exemption limit is decreasing to $5 Million for Individuals and $10 Million for married couples (adjusted for inflation).  

To ensure your assets are protected and your wishes honored, consider the following advice to navigate the upcoming challenges.   

Remember, a well-crafted estate plan is not only about preserving wealth but passing on your hard-earned legacy to your loved ones.  

Stay Informed and Regularly Review Your Plan  

Tax laws are complex and subject to revision. This makes it all the more crucial to periodically review your estate plan with a qualified estate planning attorney. Regular reviews empower you to adapt and be agile. Tax laws evolve and so should we. Adapt your strategies in response to changing tax conditions. Taking action in advance is the only way to ensure your plan remains both effective and aligned, “Aligned” with your objectives whether in the face of changing “death tax” rules or other challenges.  

Maximize Lifetime Gifting Opportunities  

One proactive approach to offset the potential reduction in the estate tax exemption is to maximize lifetime gifting opportunities. Gifting assets to beneficiaries during your lifetime can help reduce the overall value of your estate, reducing the amount subject to taxation. Consult with a legal professional whose expertise is estate planning. As part of your legacy planning, explore strategic gifting options and consider the current exemption levels and the potential changes on the horizon. 

Utilize Irrevocable Trusts  

Irrevocable trusts can be powerful tools in protecting your assets and minimizing estate tax liability. Transferring assets into an irrevocable trust, will remove them from your taxable estate. The goal is to lower your overall tax burden as well as the future burden on those you care about. Work closely with an experienced estate planning attorney to determine the most suitable type of irrevocable trust for your specific needs and goals.  

To ensure your assets are protected and your wishes honored, consider the following advice to navigate the upcoming challenges.   

Consider Life Insurance  

Life insurance is a valuable component of estate plans, providing a source of funds to cover potential estate taxes. The death benefit from a life insurance policy can be strategically structured to help offset tax liabilities. Taking action on this will ensure your heirs receive the intended inheritance without unnecessary financial strain. Review your life insurance and consider increasing it to minimize the upcoming 2025 death tax exemption impact.  

Evaluate Business Succession Planning  

For those with significant business interests, the sunset of the estate tax exemption may impact succession planning. Adopt new strategies to transfer business interests efficiently – such as family limited partnerships or limited liability companies. You’ll want to take these actions sooner than you may have planned to reduce the impact of this sunset. These structures will facilitate a more seamless transfer of ownership, while maximizing tax benefits.  

A Final Word  

The sunset of the estate tax exemption is just the latest significant change to the tax code, further highlighting the importance of proactive (and strategic) expert estate planning.   

Work with an experts. Choose a legal partner to help guide you and look out for your interests in order. Partnering with a qualified pro will help offset the impact of not just this impending change, but more. Remember, a well-crafted estate plan is not only about preserving wealth but passing on your hard-earned legacy to your loved ones.  

All of your Estate Planning needs, no matter how big or how small, can be taken care of by The Law Offices of Michael Kuldiner P.C. Contact us today to set up an appointment with our Estate Attorney.