If you begin your estate planning before you’re well into your senior years, you likely will want to make some modifications down the road as your family, your assets and/or your priorities change. Experienced estate planning professionals can help people craft their plan to help minimize the number of modifications they’ll need to make – for example, if a beneficiary passes away or a new grandchild is born.
Another factor that should also be considered while developing an estate plan is anticipated changes to state and federal laws that could affect things like estate taxes. One of these changes could take effect less than two years from now.
Scheduled changes to the TCJA
The Tax Cuts and Jobs Act (TCJA), which took effect at the beginning of 2018, was considered a massive gift to people with millions of dollars in personal assets. The law approximately doubled the value an estate could have before it was subject to federal estate taxes. This year, that value is about $13.6 million for individuals and twice that for married couples.
That provision in the law, however, has a sunset clause. At the beginning of 2026, the estate tax exemption will drop back to less than $6 million for individuals and double that for couples – unless Congress decides to renew or otherwise change the provision. Note that gift tax exemption limits, which were also raised by the TCJA, are also scheduled to sunset.
Strategies for avoiding estate taxes
Since no one knows what Congress will do in two years (or two weeks, for that matter), it’s smart to start planning sooner than later for a potentially significant drop in that estate tax exemption amount. There are a number of ways to do this. Trusts may be one way. Gifting assets to loved ones and others rather than keeping them is another possible strategy. That may be better to do before that exemption potentially drops by about half as well.
Certainly, every person’s estate plan is highly unique. However, many people share the same goals, including not letting taxes eat up any of the assets they want their family, other loved ones and organizations they support to have. Seeking personalized legal guidance is often critical to achieving those goals.