What Happens When the Estate and Gift Tax Laws Change?

– The TCJA provided higher estate and gift tax exemption amounts, but these are scheduled to revert to 2017 levels in 2026.
– It is important to evaluate gifting capacity before utilizing the exemption, and to consider various gifting options such as forgiving loans or gifting discounted business shares. – The current increased exemption amounts may make it beneficial to use the exemption before it sunsets in 2026, as large lifetime gifts made during this period will not be subject to clawback.
– It’s important to prioritize how to address potential estate tax liability in light of the 2026 impending estate tax sunset, and to consider the impact on family dynamics and finances.
– It’s advisable to review estate documents to ensure they are aligned with current goals and family situations, and to update them every 1 to 3 years. – Tom and Cindy’s gross estate is around $9,100,000 with an exemption amount of around $14,400,000.
– They are considering selling their logistics business, which was appraised at $25 million a few years ago, and have not used any of their lifetime exclusion.
– They are working with their wealth team and attorney to establish grantor trusts to gift a portion of their ownership interests in the business to take advantage of higher exemption levels before they decrease.
– Other important tax changes in 2026 include the top personal income tax rate returning to 39.6%, lower standard deduction levels, the expiration of IRC Section 199A (QBI deduction), and lower levels of exemption amount for calculating the Alternative Minimum Tax (AMT). – The state and local tax limitation is set to disappear in 2024, allowing all state and local taxes to be itemized deductions.
– This change will be subject to Alternative Minimum Tax (AMT) limitations.
– It is recommended to collaborate with a wealth consultant and planner to build a long-term wealth strategy to navigate the current financial environment.
– Doing so can provide peace of mind and help protect and grow the wealth that has been worked hard to build.

https://www.firstcitizens.com/wealth/insights/planning/planning-for-tcja-estate-and-gift-tax-sunset