| The one constant is change….and the estate tax is no exception…read on:
CLIENT QUESTION:
Hi Lawrence,
I just learned of the potential sunsetting of the estate and gift tax exemptions at the end of 2025 and it occurred to me that I’d like to hear your take on the issue and that many of your other clients might also benefit from your advice, so perhaps you may want to address this in a forthcoming LISTEN TO LAWRENCE LETTER.
MY RESPONSE:
Indeed, the federal exemption is sunsetting on January 1, 2026. I love sunsets, but this one is annoying. When Trump came into office in 2016, he doubled the Federal estate tax exemption…but this doubling only applied for 10 years. Why? Because there is a law on the books that says that if a new law will increase the deficit, you need at least 60 senators to make it permanent…and if less than 60 the old law returns after 10 years. That is the situation here. Good luck getting 60 senators to do anything!
Today, the federal estate tax exemption is $13, 610,000. On January 1, 2026, the exemption will be half what it would otherwise be (it is adjusted for inflation each year)…so expect it to be somewhere around $7 million.
So what do I think will happen?
I have absolutely no idea! It would help if you would tell me who is going to win the next election and who is going to control Congress.
The bottom line is that you can only plan for what you do know. We do know that the law right now is for the exemption to fall to about half what it would otherwise be in 2026.
Plan accordingly and adjust later. For our wealthy clientele, there remains an opportunity to take advantage of the higher exemptions. Best to act now. |
