The Time is Now

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How well do you understand what would happen to your assets if you were to pass away tomorrow? Taken a step further, where appropriate: How well do your impacted/interested family members understand what would happen to your assets if you were to pass away tomorrow?

Though it can be challenging to think through these questions, estate planning is an important piece of your financial picture – significantly impacting wealth transfer, asset protection, and charitable gifting.

In 2026, the 2017 Tax Cut and Jobs Act is set to expire, lowering the federal estate tax exemption. Learn about the impact this could have on your finances and our recommended next steps below.

Expiration of the current Estate Tax Exemption

The 2017 Tax Cut and Jobs Act raised the lifetime estate and gift tax exemption to $11.18 million for individuals and $22.36 million for couples. These numbers have been adjusted for inflation, and in 2023 they are currently $12.92 million for individuals and $25.84 million for couples.

This means that when calculating the value of a deceased person’s estate, any amount over $12.92 million for individuals or $25.84 million for couples is subject to federal estate tax. The current federal estate tax rate is 40%. As written, this provision of the Act is scheduled to expire at the end of 2025.

Possible Impact

When the 2017 Tax Cut and Jobs Act expires, the exemption amount will revert to the pre-2017 level of $5 million per person indexed for inflation.The prevailing thought in the estate planning community is that this will place the exemption anywhere between $6.5 million -$7 million per person in 2026.

Absent any action taken by Congress before 2026, the amount of assets that could have been shielded from the federal estate tax and gifted during life could be nearly halved. Thus, inaction would result not only in a significantly higher estate tax bill for affected individuals but a much larger pool of affected individuals.

Figure 1

Lowering the lifetime estate and gift tax exemption increases the assets subject to federal estate tax, shown here with a $15 million estate.*

Source: Balentine

Figure 2

Should the 2017 Tax Cut and Jobs Act expire, the taxes that would be owed on an individual’s $15 million estate in 2026 would be almost quadruple the taxes owed in 2023.*

Source: Balentine

How to Protect Your Assets

We encourage you to work with an estate planning attorney or financial planning professional to review your estate plan before the exemption expiration. While taxes may not be your paramount motivation to review your estate plan, we recommend revisiting it at least every five years to ensure it is aligned with your current wealth transfer, asset protection, and charitable gifting preferences. Fine-tuning your last wishes will create peace of mind for yourself – and your loved ones.

Here at Balentine, we have a dedicated team of planning professionals to assist you with your estate planning needs. Along with decades of expertise working with clients to hone their estate plans to their specific goals, we also partner with a third-party platform, Vanilla, to build custom diagrams of client estate plans and offer suggestions on areas of exposure and potential ways to maximize their intent. Further, we routinely work alongside our client’s estate planning attorneys to review estate plans and ensure that they remain aligned with client goals. The process is simple, and the time is now. Estate planning attorneys are already beginning to feel the influx of clients due to the 2025 deadline.

If you would like to begin your review, please feel free to contact your Relationship Manager or me directly. As always, we’re happy to help, and your continued confidence in us is paramount.

*Assuming a $7 million exemption.

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