A looming estate planning issue is the possible expiration of certain provisions from the 2017 Tax Cuts and Jobs Act, which set the federal estate tax threshold at an historic high.
Currently for an individual, the federal estate tax exemption threshold is at $13.61M. For a married couple, it’s at $27.22M. And while these numbers will stay in place in 2025, change is on the horizon.
Right now, a single person utilizing the current exemption to its fullest, on an estate valued at $13M, would not owe the federal government any estate tax. If that same estate was valued at $15M, the estate would owe tax on the $1.39M by which it exceeds the current threshold. At the 40% taxation rate, that adds up to a $556,000 federal tax bill.
Starting on January 1, 2026, the tax exemption threshold will automatically reset (or “sunset”) to its former level of $5M, indexed for inflation to approximately $7M, unless Congress acts before then. This reduction in the exemption will clearly have a major impact on many families’ estate plans.
Addressing this estate planning matter before 2026 can help to reduce your estate’s tax liability which, in turn, will reduce your federal tax. And this can result in increasing, sometimes significantly, the amount you’ll ultimately be able to leave to your loved ones.
If you think you may be affected by this likely reduction in the estate tax threshold, we invite you to call Elea Nielsen at 773-525-0153. She’s happy to discuss your needs, and create an individualized plan for you to avoid unnecessary taxation.
All materials herein have been prepared by Erwin Law for informational purposes only and are not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between you and the rm. You should not act upon this information without seeking professional counsel.
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