The end of 2025 feels so distant. But the time between now and then will pass in the blink of an eye – just ask any tax planner.
The Tax Cuts and Jobs Act (TCJA), passed in 2017, created a golden opportunity for families to preserve and maximize the wealth they pass on to future generations through smart estate planning. But it’s an opportunity with a ticking time limit.
At a glance, the Tax Cuts and Jobs Act temporarily doubled the unified gift and estate tax exemption from $5.6 million per individual to $11.18 million ($13.6 million in 2024, after adjusting for inflation.) For a married couple, this allows up to $27.2 million to be sheltered from federal estate and gift taxes. However, these exemptions are scheduled to expire at the end of 2025. When they do, the exemption level will revert to about $7 million per individual (adjusted for inflation).
This means that millions more dollars of gift and estate assets will be exposed to taxation when they are passed down. And in a tightly contested election year with a deadlocked Congress, there is no guarantee that the more favorable exemptions of the TCJA will be extended beyond 2025.
In short, the fate of the exemptions is not something any single person can predict or influence. But you can take advantage of them now… while there’s still time.
Why Early Planning is Critical
We recently hosted a webinar with Spencer Fane focused on election-year estate and tax planning strategies. During the session, attorney Kelly Mooney mentioned that given the favorable rate environment under the TCJA – including a 21% corporate tax rate, a 37% top individual rate, and a 20% qualified business income deduction for pass-through entities – thoughtful tax planning around the potential “sunset” of these provisions is prudent. Delaying action or attempting to rush planning efforts at the last minute introduces significant risks like missing the opportunity to maximize exemptions, facing market and economic uncertainties, legislative changes, increased complexity and errors, lack of flexibility, higher costs, and emotional stress. A well-designed, proactive strategy will help lock in the higher exemptions before they sunset and provide flexibility to adjust course as circumstances evolve.
Several proven strategies can help capitalize on the remaining period of elevated exemptions:
- Gifting & Trusts: Making larger tax-free gifts now, whether outright or in a trust, can remove substantial assets from future estate tax exposure. Irrevocable trusts are particularly powerful, allowing gifted assets to grow and compound outside the donor’s estate.
- Credit Shelter Trusts: For married couples, credit shelter trusts enable each spouse to fully utilize their exemption and remove significant wealth from their taxable estates in a tax-advantaged manner.
- Charitable Contributions: Families passionate about philanthropy can realize valuable income and transfer tax benefits through well-planned charitable giving strategies integrated with their estate plan.
- Asset Transfers & Appreciation Planning: Removing appreciating assets from estates now can help minimize future estate taxes by allowing that growth to occur outside of the estate.
These are just a few potential approaches to consider, underscoring the benefits of thoughtful, customized planning well before the legislation’s sunset.
That said, no estate plan is a set-it-and-forget-it exercise. Personal situations and goals evolve, tax laws change, and new opportunities and challenges emerge. You will need to update and adapt your plan over time, so it reflects both your intentions and the current regulatory realities.
We cannot urge you strongly enough to revisit your estate plan now – or create one if you don’t have one. The financial cost of inaction could be high. What’s more, we expect to see a last-minute scramble at the end of 2025, so thoughtful action now will save you from stress and headaches later. The advisors at Prime Capital Investment Advisors are dedicated to helping clients maximize strategies and guiding clients through all aspects of their financial lives. Call a PCIA advisor today at 800.493.6226 or reach out to us here.
This information does not constitute legal or tax advice. PCIA and its associates do not provide legal or tax advice. Individuals should consult with an attorney or professional specializing in the fields of legal, tax, or accounting regarding the applicability of this information for their situations. Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., Suite 150, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”). Certain services may be provided by affiliates of PCIA.
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