Written by Marvin Blum, Founder of The Blum Firm, P.C.
Here’s the bottom line: The estate tax is here to stay. Efforts to repeal the estate tax failed.
Here’s what did pass: For an eight year window, the estate tax exemption doubles to $11.2 million. However, that provision sunsets on December 31, 2025, and the exemption level cuts in half on January 1, 2026.
What planning do you do now?
(1) Engage in planning to use the new exemption during the next eight years, as this is a “use it or lose it” situation. Consider “estate freeze” gifts to a Spousal Lifetime Access Trust (“SLAT”) to benefit your spouse or gifts to a Defective Grantor Trust (“DGT”) to benefit your kids.
(2) Aside from additional gift planning, unless you are certain to die within eight years, continue planning as if the exemption were the current $5.6 million level. If you believe you may be alive on January 1, 2026 and your assets at death could exceed $5.6 million (plus inflation adjustments), then continue the same planning used before the new tax act to avoid paying the 40% estate tax.
(3) Check your estate plan for formula clauses tied to the exemption amount to make sure your assets still pass as desired.
Coming soon: Be on the lookout for announcements from The Blum Firm regarding planning opportunities to save income tax under the new tax act. We will be in touch regarding business restructuring ideas that may generate significant income tax savings.