Changes in the estate tax exemption are coming soon: What do I need to know and plan for?

Estate Planning is a topic that affects everyone. Part of estate planning is understanding the estate tax exemption. If you have tried using searching Google to get some of your questions answered, you may have come across words such as "evolving estate tax policies" along with “unified credit". When trying to figure out the estate tax exemption amount of a loved one who has recently passed, legal jargon can be confusing.

When you hear the estate tax exemption amount is $12.92 million in 2023 that is not 100% accurate.

The estate tax exemption is tied to the gift tax exemption and to correctly determine estate tax exemption as of the year of passing, you must also consider what lifetime gifts were made by an individual or couple. This is all part of the unified credit when discussing estate tax exemption. Does this sound confusing? You are not alone. For the general purposes of this article, we will keep it very simple. The chart shows the estate tax exemption amount by year.

We also know the exemption amount for 2024 is estimated to be $13,610,000 due to inflation. However, this exemption will sunset January 1, 2026. What exactly does that mean? For this case, sunsetting means, that on January 1, 2026, the estate tax exemption amount will be $5,000,000, indexed for inflation. It is predicted the amount will be $6.2 million. While this amount is still quite large, it is not as large as the current amount of $12.92 million. It will be very important to speak with a qualified estate planning attorney well before January 1, 2026, to make sure you utilize all of the vehicles available to reduce the amount of estate tax for anyone passing after December 31, 2025.

"...sunsetting date for the current exemption is January 1, 2026."

While I know it is never easy to talk about dying, we have always heard the only things certain in life are death and taxes. It is important that you understand how all of this can affect you. Don’t leave it to your loved ones to figure out. All situations are different and require legal expertise. We are here to answer your questions.

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