They say you can't take it with you, but with the current estate tax exemption set to expire in 2026, you may be paying more than you planned for. As the estate tax exemption drops from historic highs, savvy investors are rethinking estate strategies. Is your wealth protected?
Benjamin Franklin famously said, “In this world nothing can be said to be certain, except death and taxes." So now is the time to plan. We got the scoop on how to plan for these upcoming changes from Jason Landers with Keel Point Advisors.
What Is the Estate Tax?
The federal estate tax is a tax imposed on the transfer of assets from a deceased person to their beneficiaries. It only applies to estates that exceed a specific threshold, with amounts above the exemption limit taxed at a rate of 40%. The Tax Cuts and Jobs Act (TCJA) of 2017 increased the exemption significantly, offering more protection from estate taxes. However, unless Congress intervenes, this exemption is set to decrease in 2026.
The Estate Tax Exclusion Expiration in 2025: What It Means for Taxpayers:
The TCJA doubled the estate tax exemption, allowing individuals to transfer up to $13.99 million (as of 2025) without triggering federal estate taxes. However, in 2026 this amount is expected to drop significantly, with estimates indicating a reduction from $14 million to $7-8 million. For high-net-worth individuals and families, this reduction could have significant financial consequences. Currently, a married couple can protect almost $28 million from estate taxes. If the exemption reverts, the amount shielded for couples decreases to around $14-16 million. This shift would expose estates valued between $14-$28 million, which are currently tax exempt, to be subject to significant taxation. This reduction could result in a significant increase in tax liabilities for many families, which may require reevaluating wealth transfer strategies sooner rather than later.
The Effect on Estate Planning:
There is the possibility that the current exemption could be extended or slightly modified, but for that to happen, Congress would have to pass legislation. Wealthy individuals are advised to act now to capitalize on the higher exemption amount before it expires. Examples of strategies include:
Gifting Assets Now: By gifting assets in 2025, individuals can lock in the higher exemption amounts, even if this amount is reduced in 2026. A married couple can gift a total of $38,000 per year to as many people as you like.
Trust Planning: Setting up irrevocable trusts, such as Spousal Lifetime Access Trusts (SLATs) or Grantor Retained Annuity Trusts (GRATs) can be an effective way to reduce estate tax liability. Estate planners are advising individuals to create gift trusts sooner rather than later. Once the trusts are established, assets can be transferred into them later in 2025, depending on if the
exemption is extended or reduced.
Early Action Can Protect Your Wealth:
With the uncertainty surrounding the estate tax exemption, it’s essential for families to review and reevaluate their estate plans to ensure they remain effective. This includes reviewing current trusts, taking advantage of the higher exemption by making larger gifts, and consulting with estate planning professionals to explore strategies that can reduce potential future tax liabilities. Although the future of the exemption remains unclear, taking proactive steps now can help protect wealth for future generations and reduce the potential tax burden.
As the estate tax exemption faces significant changes in 2026, high-net-worth individuals must consider their estate planning strategies. At Keel Point, we take a comprehensive approach to financial planning that includes an in-depth analysis of a family’s investment portfolio, tax situation, and wealth transfer arrangements. While portfolio returns are clearly an important part of building wealth, our team also looks at ways to minimize taxes and create efficiencies for a family. Please contact the Findlay Landers Group to schedule an appointment.
It’s essential for families to review and reevaluate their estate plans to ensure they remain effective.
By gifting assets in 2025, individuals can lock in the higher exemption
amounts.