Authored by: Brian W. Sak, CFP®, CLU®, ChFC®
In a significant update for estate planning and wealth management, the Internal Revenue Service (IRS) has announced an increase in the estate and gift tax exemption for 2025. The exemption amount will rise to $13.99 million per person, up from $13.61 million in 2024. Additionally, the annual exclusion gift limit will rise to $19,000 per individual up from $18,000 in 2024. These changes offer individuals and families additional flexibility in managing tax-free transfers during life or at the time of death.
Implications Beyond 2025
It's important to note that this increase is set against the backdrop of the Tax Cuts and Jobs Act, which temporarily doubled the estate and gift tax exemption starting in 2018. However, without further legislative action, these provisions will sunset after 2025, potentially reverting the exemption to pre-2018 levels, adjusted for inflation. Now that Trump has won the election, many speculate that certain tax provisions will be extended. To effect significant changes in the TCJA, it's essential to note that any amendments typically require a majority vote in both the House and Senate, followed by presidential approval, which could present challenges ahead. The political landscape remains complex, and achieving consensus will be key to any potential tax reforms.
Preparing for Potential Changes
Financial advisors are closely monitoring these developments to guide their clients effectively. With the possibility of a reversion to lower exemption levels, advisors are emphasizing the importance of reviewing estate plans now. By leveraging the current high exemption, individuals can better secure their financial legacies and mitigate potential tax impacts in the future.
Other IRS Adjustments
In addition to the estate and gift tax exemption changes, the IRS has adjusted several other provisions. Key among these are changes to federal income tax brackets, long-term capital gains tax brackets, and the eligibility criteria for the earned income tax credit. These adjustments reflect broader economic considerations and aim to support taxpayers amid evolving financial landscapes. A full review of the tax changes for 2025 can be found here.
Strategic Financial Planning
As these changes unfold, it is crucial for individuals to engage with an experienced team who can offer tailored solutions. By addressing both the technical aspects of tax planning and the emotional dimensions of wealth transfer, advisors can help families navigate complex financial decisions while maintaining harmony and security for future generations.
The team at Granite Harbor stands ready to assist you in navigating these complex changes in tax regulations and estate planning. Our team of seasoned professionals offers the expertise and insight needed to optimize your financial strategies amidst evolving legislative landscapes. We invite you to schedule a consultation with us to explore tailored solutions that align with your unique goals and aspirations. Take proactive steps today to secure your financial legacy.