What Should Your Estate Planning Strategy Look Like in 2025?
Many of the provisions in the Tax Cuts and Jobs Act (TCJA), the first Trump Administration’s signature tax law, are scheduled to sunset at the end of 2025. Unless Congress acts, the federal gift and estate tax exemption will drop in half — from about $14 million per person in 2025 to around $7 million in 2026.
Time will tell if the second Trump Administration will push to extend the high exemption, allow it to expire, or propose something in between. Fortunately, you don’t need a crystal ball to refine your estate planning strategy in a way that will position you to protect your assets and your legacy.
5 Estate Planning Action Steps to Consider in 2025
It’s natural for anyone who has amassed a net worth in the millions to wonder whether they need to worry about the estate tax. As with so many things, the answer is: It depends.
In general, estates worth less than $7 million in assets aren’t likely to trigger federal estate tax (state-level taxes are another matter). However, individuals with estates that are greater than $7 million ($14 million for a married couple) would be wise to take steps now to protect those assets in the event that the federal exemption is lowered.
Here are some concrete actions to consider in early 2025:
- Capture information about your assets. When creating or revising your estate planning strategy, you and your estate planning advisors need to get your arms around all of your assets. How is each titled? What’s your tax basis in each asset? Although facts and circumstances vary, the general advice is to hold onto low-basis assets, such as fully depreciated real estate, so your heirs can take advantage of a stepped-up basis.
- Think through risks to your legacy. Take some time now to think through the factors that could jeopardize your legacy. How responsible are your kids and their spouses? Are you concerned about debt or legal issues? Do you intend to provide for your grandkids or future generations? With your intentions and family dynamics in mind, now might be a good time to revisit existing trusts or create new ones. It might be prudent to press pause on funding those trusts until the federal exemption question is answered.
- Sleep on it. Estate planning involves a great many deeply personal issues. These are decisions you should make deliberately. You likely have a number of different options available to you to preserve your legacy. If you move too hastily, you could make a move that is impossible or difficult to unwind, putting your future self at a disadvantage.
- Make annual gifts at New Year’s. Consider taking advantage of the 2025 annual gift tax exclusion ($19,000 per recipient) in January or February instead of waiting until December. This is especially important if you’re suffering from health issues that limit your life expectancy. Rather than a sterile account transfer, think about making the gift in person so you can see the smiles and appreciation on your loved ones’ faces.
- Circle the estate planning wagons. Are your estate planning attorney, accountant, and wealth planner on the same page working seamlessly to execute your estate planning strategy? Make sure your financial advisors review all trust documents so you can line up gifts against your personal balance sheet to make sure they align with your wishes. Keep in mind that these advisors will only get busier as 2025 progresses, so if you don’t already have these advisors on retainer, consider doing so.
Lay a Foundation to Protect Your Legacy
When you come to the table with a thorough understanding of your assets and your intended legacy, as well as a team of advisors working hand-in-hand to execute your strategy, you have a strong foundation from which to execute an estate planning strategy that will protect your assets and legacy in any political climate. If you have any estate planning questions, please contact your Copeland Buhl advisor.