IRS Announces Estate and Gift Tax Exemption Levels for 2025
- posted: Nov. 21, 2024
As we approach 2025, a great deal of attention will be paid to the estate tax exemption in the coming year. The exemption is the amount that a decedent may pass to heirs without any federal estate tax being imposed. Under the Tax Cuts and Jobs Act of 2017 (TCJA), the exemption was sharply increased from the level that had been used previously. However, the TCJA included a sunset provision, which means that the estate and gift tax exemption will revert to its prior standard at the end of 2025 unless Congress acts to change it.
Each year, the IRS issues the updated estate and gift exemption figure, reflecting annual inflation. For estates of people who die within 2025, the individual exemption is $13.99 million. Someone who is married can double this amount to $27.98 million with skillful planning. Of course, no one can be sure when they will pass away, so you should prepare your will and other estate planning instruments as if the TCJA will expire and the lower exemption will apply to your estate. It is expected that the individual amount would be approximately $7 million if subsequent legislation is not passed.
If your estate value might possibly exceed the post-2025 level, a knowledgeable attorney can advise you of several potential strategies to help protect your loved ones, such as:
Strategic gifts under the higher exemption amount — One way to take advantage of the current exemption is to make gifts now, reducing the taxable portion of your estate when the exemption drops. By transferring assets or cash to heirs during your lifetime, you lock in today’s higher exemption levels.
Transferring assets through trusts — Trusts can reduce the size of your estate and preserve wealth across generations. Specific options include the Grantor Retained Annuity Trust (GRAT), Spousal Lifetime Access Trust (SLAT) and Irrevocable Life Insurance Trust (ILIT).
Utilizing a spouse’s exemption — Portability allows a surviving spouse to use a deceased spouse’s unused exemption, doubling the amount they can pass tax-free. However, portability does not apply automatically—it must be elected on the estate tax return of the deceased spouse.
With the sunset on the horizon, now is the time to consult with an attorney who can provide personalized counsel on wills and trusts. Planning proactively allows you to take advantage of the higher exemption before it decreases, potentially saving millions in taxes and preserving more of your legacy for future generations. Don’t wait until the last minute; reviewing your estate plan now can provide peace of mind in an uncertain tax landscape.
The Colorado attorneys at Heckman & O’Connor P.C. advise clients on all types of estate planning issues. We have assisted Vail Valley residents for more than 40 years, serving communities such as Eagle, Vail, Gypsum, Avon, Minturn and Leadville. Please call 970-926-5991 or contact us online for a consultation. Our office is in Edwards.
IRS Announces Estate and Gift Tax Exemption Levels for 2025
- posted: Nov. 21, 2024
As we approach 2025, a great deal of attention will be paid to the estate tax exemption in the coming year. The exemption is the amount that a decedent may pass to heirs without any federal estate tax being imposed. Under the Tax Cuts and Jobs Act of 2017 (TCJA), the exemption was sharply increased from the level that had been used previously. However, the TCJA included a sunset provision, which means that the estate and gift tax exemption will revert to its prior standard at the end of 2025 unless Congress acts to change it.
Each year, the IRS issues the updated estate and gift exemption figure, reflecting annual inflation. For estates of people who die within 2025, the individual exemption is $13.99 million. Someone who is married can double this amount to $27.98 million with skillful planning. Of course, no one can be sure when they will pass away, so you should prepare your will and other estate planning instruments as if the TCJA will expire and the lower exemption will apply to your estate. It is expected that the individual amount would be approximately $7 million if subsequent legislation is not passed.
If your estate value might possibly exceed the post-2025 level, a knowledgeable attorney can advise you of several potential strategies to help protect your loved ones, such as:
Strategic gifts under the higher exemption amount — One way to take advantage of the current exemption is to make gifts now, reducing the taxable portion of your estate when the exemption drops. By transferring assets or cash to heirs during your lifetime, you lock in today’s higher exemption levels.
Transferring assets through trusts — Trusts can reduce the size of your estate and preserve wealth across generations. Specific options include the Grantor Retained Annuity Trust (GRAT), Spousal Lifetime Access Trust (SLAT) and Irrevocable Life Insurance Trust (ILIT).
Utilizing a spouse’s exemption — Portability allows a surviving spouse to use a deceased spouse’s unused exemption, doubling the amount they can pass tax-free. However, portability does not apply automatically—it must be elected on the estate tax return of the deceased spouse.
With the sunset on the horizon, now is the time to consult with an attorney who can provide personalized counsel on wills and trusts. Planning proactively allows you to take advantage of the higher exemption before it decreases, potentially saving millions in taxes and preserving more of your legacy for future generations. Don’t wait until the last minute; reviewing your estate plan now can provide peace of mind in an uncertain tax landscape.
The Colorado attorneys at Heckman & O’Connor P.C. advise clients on all types of estate planning issues. We have assisted Vail Valley residents for more than 40 years, serving communities such as Eagle, Vail, Gypsum, Avon, Minturn and Leadville. Please call 970-926-5991 or contact us online for a consultation. Our office is in Edwards.
