Disclaimer: We are not tax professionals; this article should not be construed as tax advice. It is for information purposes only. Always consult with your tax and financial advisors for tax advice.
In 2017, a temporary law called the Tax Cuts and Jobs Act (TCJA) was put in place to offer relief to estate taxes. It took the gift/inheritance tax threshold from around $6 million for an individual and doubled it to approximately $13 million— $12.96 million if we’re being precise. This meant that estates could shelter nearly $13 million dollars in gifts and inheritances before taxation.
As we mentioned before, this law was put in place in 2017 and, without intervention, will expire on December 31, 2025. This means that the tax levels in place at the time of the law’s enactment, so 2017, will become the legal threshold again— but with inflation taken into account. It is expected the new gift tax threshold with be approximately $7 million for an individual.
This means, that if the value of your estate, when you go to bed on December 31, 2025, is say $11 million and you do nothing to protect it, when you wake up the next day, on January 1, 2026, you will now have approximately $4 million of your estate subject to taxation just because the law reverted back to the 2017 standards.
As you can imagine, the TCJA has saved many estates millions of dollars in tax liability over these years. Where you may be getting stuck is how this could possibly affect you. You may be thinking, “but my estate is nowhere near that threshold!” Are you sure? Many people do not believe they are wealthy, they live completely normal, average lives, live frugally, drive sensible vehicles, and have nice (but not lavish) homes; but when they begin tallying every piece of their estate, it does add up. And can hit this threshold rather quickly. And no matter whether your estate is just barely over the limit, or is millions over, the taxes add up and can limit the reach of your legacy.
We are here to help provide solutions that allow you to benefit your loved ones as far into the future as possible.
So, you may be wondering, what can I do to protect my estate from taxation?
There are options available that can protect your estate and limit your tax liability— if you make the moves now, rather than waiting until after 2026.
Trusts
There are certain Trusts that can be established that can shelter some of your estate from tax liability. Especially if the estate is shared within the context of a marriage. Discussing your Trust options with a skilled estate planning attorney is a good idea, regardless of the size of your estate. But it’s an exceptional idea if your estate is valued near that threshold.
Trusts are wonderful estate planning tools that are designed to protect a family’s legacy, keep it private, and create very specific scenarios under which assets can be distributed. People have been using Trusts to protect their family wealth and legacy for centuries.
You may assume that Trusts are only for the very rich, but that is not true. A Trust can be a wonderful tool used to protect a family’s legacy—even if that legacy is not what you imagine when you think of a “trust fund baby”.
Give Gifts Now
Another option is to give gifts now, rather than at or after the time of your death. The benefit here can be twofold.
1. By gifting the assets now, you can give a much higher value asset and still avoid the gift tax;
2. You get the benefit of watching the beneficiaries receive and enjoy the asset during your lifetime. You may even get to enjoy the asset with them.
As an example, it may serve your legacy and estate to gift a real estate property to a beneficiary now, rather than at the time of your death. This will transfer the value of that property into your loved ones’ estate, thus lowering the total value of your estate, and limiting your tax liability.
Taxes are a part of life. An annoying part, we know, but a normal part of life, nonetheless. Your estate will have some tax liability, we are sure, but being proactive now can help to ensure that you are in a great place when, and if, the TCJA changes occur.
The good news about these changes is there is still plenty of time to prepare. And we would love to help you secure the largest legacy possible for your loved ones. Please call us at (404) 736-6066 or visit our website to schedule a consultation. We would love to discuss how proactive estate planning can help to minimize the effect of these law changes in 2026.
