Though 2026 seems far away, it’s essential to start preparing now for such sweeping changes, even if Congress modifies or extends current provisions in the interim.
With that in mind, here’s the latest on the estate tax exemption.
The Big Picture
For 2025, individuals can benefit from a lifetime estate and gift tax exemption of approximately $13,990,000, allowing for significant tax-free gifts during their lifetime or after passing.
Starting in 2026, however, this exemption is set to revert to its previous level of $5 million (which will be adjusted for inflation to an estimated $7 million), significantly reducing tax-free gifts.
The Potential Repercussions
This reversion could lead to significant tax liabilities for those whose estates surpass the reduced exemption limit. If your assets exceed this threshold, your heirs could find themselves with a hefty tax burden.
Proactive Approach
While this change may appear daunting, it presents an opportunity to take proactive measures now. Today’s exemption level allows us to redistribute your wealth to minimize tax implications in 2026 by utilizing gifting strategies, leveraging educational or medical exclusions, and/or establishing trusts.
