Broker Check

Potential changes to federal estate tax exemption amounts

April 16, 2024

At the end of 2025, portions of the Tax Cuts and Jobs Act (TCJA) are set to expire. Many changes will come with the sunsetting of many rules, including the possibility that federal estate and gift tax exemption levels will revert to pre-TCJA levels.

Why does this matter to you?

Currently, you are subject to federal estate tax only if your individual estate is worth more than $13,610,000 for individuals or $27,220,000 for married couples. These levels are more than double those of pre-TCJA estate exemptions ($5,490,000 for individuals and $10,980,000 for married couples).1

If estate exceptions revert to pre-TCJA levels when portions of the TCJA expire at the end of 2025, more individuals and couples may be subject to federal estate tax when they pass away. If managing taxes on your estate is a priority, it may be time to start thinking ahead about your overall estate strategy.

There are several strategies you can consider to help manage your potential tax burden, such as gifting, setting up specific trusts, and forming a family-limited partnership. Each of these strategies has its own benefits and potential drawbacks.2

If you want to take a proactive approach, there are steps you can take over the next 18 months. Even if exemptions revert to their previous lower levels, you can still take steps to help manage your estate.

As financial professionals, we are here to offer guidance on estate management and to work with other professionals to create an estate strategy designed for your family. Please contact us if you have any questions or want to start discussing this topic before the rules change.

1. IRS.gov, February 2024. “Estate and Gift Tax FAQs”

2. It's important to remember setting up a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, we encourage clients to work with a professional who is familiar with the relevant rules and regulations and who can offer guidance on different trust strategies.

This letter is for informational purposes only and is not a replacement for real-life advice about how to structure a family-limited partnership. If this approach piques your interest, we would encourage more discussions with your tax, legal, and accounting professionals.

This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.