Scheduled 2025 Tax Changes

The 2017 Tax Cuts and Jobs Act are set to expire in 2025 and it is not too early to start thinking about those changes and how the expiration of the same may affect you. 

Many Americans have become complacent with the federal tax exclusions being in the $12 million range this year and think that they don’t have to worry about federal estate taxes.  But, they may be failing to keep in mind that the federal tax exclusion is set to sunset back to the amount of $5,450,000 (the 2017 amount) for decedents dying on or after January 1, 2026.  That’s quite a difference and may impact many more individuals.  All assets owned by the decedent either individually or jointly are considered in determining federal estate tax liability.  With life insurance, retirement account and homes, it is not difficult to exceed that amount. 

Further, if you are fortunate to have built significant wealth that could result in estate taxes, the gifting of assets could be a tax planning strategy to consider. 

Estate planning is very individualized and can be worth the significant tax savings which could be had.  However, effective estate planning does not happen overnight.  There are meetings with your team – financial, legal, accountant – to gather information and to strategize the best plan for you.  Then there is the drafting of documents and review of the same before they are signed.  And lastly, it may be necessary to change beneficiary designations, retitle assets, reallocate assets, etc. all of which take time.  This last step is often forgotten about and while the best plan for you that was put together by your team was with the goal of saving taxes, without the action needed in the last step, the plan will not be effective. 

Why leave your hard-earned or inherited assets to be unnecessarily taxed.  Act now.  Tax laws can be changed anytime and while we know what is set to change for 2026, one does not have a crystal ball to know what changes could happen prior to that date. 

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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