Estate Tax Exemption Sunsetting in 2026

Presented by Marc Aarons

I’m reaching out to make sure you’re aware of changes to the estate tax exemption that will take effect in 2026 due to the sunsetting provisions of the Tax Cuts and Jobs Act (TCJA).

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 2024, individuals can benefit from a lifetime estate and gift tax exemption of approximately $13.61 million, 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.

Our 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.

Additionally, the 2024 presidential election could bring further tax law changes, adding complexity to the 2026 sunset scenario.

As these changes approach, rest assured I’m here to provide guidance every step of the way. Estate planning is not just about numbers; it’s also about your goals and the legacy you desire to leave for your loved ones.

Reach out at your convenience so we can explore your options in light of the coming changes. I look forward to hearing from you.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.