Tax Cuts and Jobs Act is scheduled to sunset. Get your planning done soon so you don’t miss out.
“Due to personally owned life insurance and estate growth over time, more clients than you might think could be impacted by the estate tax sunset.”
The current estate tax exemption amount is historically high, but it’s scheduled to “sunset,” on December 31, 2025, unless Congress takes action. Many people believe they don’t have enough assets for federal estate taxes to ever apply to them, but if this sunset occurs, more may be impacted– and if not immediately, at some point in their future.
Let’s discuss estate planning, trusts, wills, and taxes…
- What exactly the estate tax exemption is – and will be
- Which clients could be impacted
- How you can prepare
1. The estate tax exemption may be cut in half or more. President Trump’s Tax Cuts and Jobs Acts (TCJA) of 2017 increased the lifetime federal estate tax exemption amount from $5.6 million to $11.18 per individual, indexed for inflation. In 2024, the exemption amount is $13.61 million per individual and $27.22 million per married couple. This means investors can transfer up to these amounts to their heirs, either during their lifetime or at death, without paying any federal gift or estate tax. Any assets above this exemption would be subject to a 40% transfer tax.
With this act, a huge portion of Americans no longer had to think too much about estate transfer taxes. However, this exemption is scheduled to sunset on December 31, 2025, unless Congress acts to extend or make it permanent. If nothing is done, the exemption amount will revert to $5.6 million per individual – indexed for inflation. Most experts project this will likely be around $6 million per person and around $12 million per couple. As a result, a huge portion of Americans will have to start thinking about federal estate taxes again.
2. More Americans may be impacted than you might think. Even with these changes, you may think most Americans still won’t be impacted by federal estate taxes. And while that could be true, more could be impacted than you might think due to estate growth. According to the chart below, even individuals with an estate worth $3 million today might have to be concerned about federal estate taxes in the future due to growth over time.
Another issue is that a lot of investors don’t consider insurance to be part of their taxable estate…but in some cases it is, which would immediately put a lot of investors in this boat.
3. There are ways you can prepare to reduce future tax burden now. The majority of people aren’t even aware of this potential coming sunset, and those who are may not believe it will ever apply to them.
Take action: Schedule a consultation to determine if this sunset will affect your estate and your heirs.
Book a free consultation
Disclosures:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This material was prepared by LPL Financial, LLC
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