Estate Planning in 2025: Why Acting Now Can Save You Later
The year 2025 is an important one for anyone thinking about estate planning. That’s because some big changes are coming to federal tax laws. Right now, you can give away a lot of money without paying federal gift or estate taxes. But after 2025, the rules will likely change, and that could cost your family more money.
Let’s break it down and talk about what you can do to protect your hard-earned money.
What Is the Federal Estate and Gift Tax?
The federal estate and gift tax is a tax on the money and property you give to others, either during your lifetime or after you pass away. But here’s the good news: There is a big exemption, which is the amount you can give away tax-free. Right now, that exemption is $12.92 million per person or $25.84 million for married couples. This means most people don’t have to worry about this tax.
That said, this high exemption won’t last forever.
What’s Happening in 2026?
Back in 2017, a law called the Tax Cuts and Jobs Act raised the estate and gift tax exemption to its current high level. But this law is temporary. On January 1, 2026, the exemption will drop back to about $7 million per person (adjusted for inflation). If you have a large estate, this change could mean a much bigger tax bill for your heirs.
For example:
If your estate is worth $10 million and the exemption drops to $7 million, $3 million of your estate could be taxed.
At a federal estate tax rate of 40%, your family might owe $1.2 million in taxes on that $3 million.
This is why acting now is so important.
What Can You Do?
The good news is that there are steps you can take before the law changes. Here are some strategies to consider:
Use Your Exemption Now If you have a large estate, think about making big gifts to your loved ones now, while the exemption is still high. This way, you can transfer more money and property without paying taxes. For example, you could give shares in a family business, real estate, or cash.
Create a Trust Trusts are a powerful tool for estate planning. You can use a trust to transfer assets while keeping some control over how they are used. For instance, you can set up a trust to pay for your grandchildren’s education or to support a favorite charity.
Work with a Professional Estate planning can be complicated, especially with the upcoming tax changes. A lawyer or financial advisor can help you figure out the best plan for your situation. They can also make sure your plan follows all the rules.
Why Plan Now?
You might think 2026 is far away, but the sooner you start planning, the better. Estate planning takes time. You’ll need to:
Take inventory of your assets (like your home, investments, and savings).
Decide who you want to leave your assets to.
Set up trusts or other legal documents.
Waiting until the last minute could mean rushing through these important decisions. By acting now, you can benefit from the current tax laws and give your family peace of mind.
Final Thoughts
The federal estate and gift tax changes coming in 2026 could have a big impact on your family’s financial future. But with careful planning, you can minimize taxes and make sure more of your money goes to the people you care about.
If you’re ready to start planning or have questions about your options, our law firm is here to help. Contact us today to schedule a consultation. Together, we can create a plan that protects your legacy and gives you peace of mind.