Steps You May Want to Take Before Tax Laws That May Sunset in 2025

Estate administration includes extensive report requirements that must be delivered to probate court in a timely manner.

As we approach 2025, it is crucial for individuals and families, not just the ultra-wealthy, to understand the potential changes in tax laws, particularly concerning estate planning. The current estate tax exemption, a result of the Tax Cuts and Jobs Act of 2017 (TCJA), is set to expire at the end of 2025. This change could significantly impact estate planning strategies. Let us share with you the steps you should consider taking to navigate these potential changes sooner rather than later.

Under the TCJA, the estate tax exemption was more than doubled. Initially, it was $5,490,000 for an individual and $11,180,000 for a married couple, indexed for inflation from a base of $5,000,000 and $10,000,000, respectively. Since then, this amount has been adjusted annually for inflation, standing at $12.92 million for individuals and $25.84 million for couples in 2023.

It is important for you to know that these elevated exemption levels are temporary and are scheduled to revert to the 2017 levels, adjusted for inflation, at the end of 2025. This means a potential reduction to approximately $6 million to $7 million for an individual. This reversion could have significant implications for many families, not just those with ultra-high net worth.

While the future of these exemptions is uncertain, it is possible that Congress may intervene, especially considering that the lower income tax brackets set by the TCJA are also set to expire. This scenario could prompt legislative changes affecting a broad range of taxpayers, and there are a few steps you can consider taking with your experienced Florida estate planning attorney in advance including, but not limited to, the following: 

  • Review your current Florida estate plan. With your experienced Florida estate planning attorney, evaluate how the potential reduction in exemptions might impact your estate plan. It is crucial to understand how your assets will be taxed and whether your current plan optimizes your tax situation.
  • Consider utilizing the current exemption. If your estate exceeds the anticipated lower exemption amounts post-2025, it may be wise to take advantage of the current higher exemption levels through strategies such as lifetime gifts or trust formations.
  • Explore trust agreements that can help you reach your goals. Specific trust agreements can be a powerful tool in Florida estate planning, offering benefits like asset protection, tax optimization, and legacy preservation. Your experienced Florida estate planning attorney will be able to help you understand the types of trusts that might be suitable for your situation.
  • Charitable planning. Charitable contributions can provide tax benefits and help reduce the taxable value of your estate. You can consider establishing charitable trusts or other philanthropic vehicles as part of your Florida estate plan and create the legacy you want to leave to future generations.

Keep in mind, tax laws and exemptions are subject to change. It is important to stay informed and maintain flexibility in your Florida estate planning to adapt to any legislative changes. The potential sunset of the current estate tax exemptions in 2025 presents both challenges and opportunities in Florida estate planning. By taking proactive steps now, you can position your estate to adapt to these changes effectively. It is not just the ultra-wealthy who need to be concerned because these changes could impact a broad range of estates. 

We know this article may raise more questions than it answers. Our estate planning law firm takes a very different approach from what you might have come to expect. Our goal is to create lifelong relationships with each of our clients, to guide and manage your legacy for the rest of your life. Please contact our offices in Stuart and in Palm City to learn more.

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