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.

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Are You Prepared for an Estate Tax Sunset?

Presented by Marc Aarons

The federal estate tax threshold rose to $25.84 million in 2023 for married couples and $12.92 million for individuals, as part of the Tax Cuts and Jobs Act (TCJA). Like several TCJA provisions, the higher estate tax limit is due to sunset in 2025. Barring congressional action, the exemption amount will return to about $6.8 million, adjusted for inflation, in 2026. Similarly, the current 40% maximum gift and estate tax rate will increase to 45%.¹

For high-net worth individuals, this could influence wealth transfer strategies. Although this sunset is coming, the good news is that it’s still a few years away.

And there’s more good news: your financial professional can help you with your estate strategy, regardless of whether Congress decides to maintain the current threshold. Now may be an excellent time to get together and start thinking about your post-2025 strategy. I look forward to your call.

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

www.ocomoneymanagers.com

MMI Disclosure: The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

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The post Are You Prepared for an Estate Tax Sunset? appeared first on Money Managers, Inc..