Have you had a chance to sit down and review each aspect of your estate plan recently? In most cases, your estate plan is designed to achieve things based on current state and federal estate laws at the time of creation. This means that if you ignore your estate planning documents for too long, you could wind up facing serious problems in the future if laws change. A regular review of your estate planning documents and overall strategy is very helpful for making sure that your plan still achieves the goals you set for it.
One such example is the estate tax exemption. This is the value of your estate that, if stay under it, is protected from applied federal estate tax. For high net worth individuals and families, it’s important to monitor that number carefully to ensure that you have plans in place to minimize your tax consequences. In a few years, the current tax exemptions will expire.
For now, 2025 may seem like it’s far off, but the truth is that this can sneak up on you quickly, especially if you have existing estate planning strategies that are aligned with items that will expire in 2025. The 2017 Tax and Jobs Act doubled the gift and estate tax exclusion, allowing individuals to carry out major generational wealth transfers at a reduced cost considering transfer taxes. Those current exclusions now allow gifts of more than $12 million before triggering any transfer, estate or gift taxes. At the yearend of 2025, however, those exclusion levels will expire.
You may think carefully about whether now is the right time to make major wealth transfer gifts before the inclusion rate decreases in 2026. There may be educational benefits as well as other benefits for recipients and can all be discussed with the help of an experienced and qualified estate planning lawyer in CA.