The 2017 Tax Cuts and Jobs Act (TCJA) introduced substantial adjustments to estate and gift tax exemptions. The act nearly doubled the lifetime estate and gift tax exemption to $13.61 million per person and $27.22 million for a married couple.
But nothing lasts forever. The increases in the federal gift and estate tax exemption are temporary and are expected to decrease by the close of 2025 and revert to (significantly lower) 2017 rates.
While there’s a possibility for new tax legislation to pass prior to 2026, families who may face tax liability in the near future should review their estate plans now and make some smart money moves to preserve their wealth — before it’s too late.
Building a strategy with estate planning
Take a proactive approach to help safeguard your goals for your legacy while ensuring that your estate plan remains effective and tax efficient. If your family is impacted, consider some options to build long-term financial stability for your loved ones:
- A credit shelter trust may be created by a surviving spouse, following the death of a spouse. Also known as a bypass or exemption trust, it allows your assets to pass on to your remaining beneficiaries — with no estate taxes — when the surviving spouse also passes. If you or your family have assets above the exclusion amount when the current law expires, this type of trust might be worth a discussion.
- Another estate planning tactic for married couples, a spousal lifetime access trust allows one spouse to create an irrevocable trust to benefit their partner. As the grantor, the assets would be taken out of your estate and are available to your beneficiary spouse as needed.This is an option for transferring wealth to your loved one and future generations without exposing the assets to federal estate tax.
- By transferring assets to your heirs now, you can effectively lower your future estate tax obligation and provide asset protection. But what about highly appreciating assets like real estate, stocks or cryptocurrency that may see significant growth in the future? A grantor retained annuity trust allows you to transfer that asset appreciation to your beneficiaries. That means you can potentially eliminate estate and gift taxes that would otherwise be paid on the value of the appreciation.
At Magone & Company, our goal is to help you create long-term financial stability for you and the people who matter most to you. For estate planning guidance or assistance, give us a call today at (973) 301-2300.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.