For almost everybody, estate tax has been a “Who Cares?” matter. Only heirs of the wealthiest two tenths of one percent (fewer than two out of every thousand who die) have needed to be concerned. According to the Internal Revenue Service, this year federal estate tax returns are required only for estates with values exceeding $12.92 million.
Now, however, the topic of estate tax is back on the radar, because the tax rates scheduled back in 2018 will expire after 2025, the Tax Policy Center’s Briefing Book explains. Without new actions from Congress, the estate tax exemption will take a drop of more than 50%, reverting to $5.49 million (adjusted for inflation). What’s even worse, the actual current maximum gift and estate tax rate of 40%, is scheduled to increase to 45% in 2026.
“Given the impending changes, high-net-worth individuals and families should revisit their estate planning,” the cbh.com Guide advises. “Families that may face estate tax liability in 2026 may benefit from transferring assets – and their appreciation – out of their estates sooner rather than later, Fidelity Wealth Management adds. It’s urgent to pay attention to your estate planning now, PNC Insights stresses: “The exclusion amounts currently available for the federal gift and estate tax and generation-skipping transfer tax may prove to be a once-in-a-lifetime opportunity to pass significant wealth to children, grandchildren, and more distant generations in a tax-efficient manner.”
At Geyer Law, we try to bring together family members to share values and wealth transfer. Totally aside from the estate tax exemption “sunset”, what we’ve found is that the earlier the discussions take place, the smoother the transition of wealth will be from generation to generation. Even if significant life events have not impacted your estate plan, we recommend re-evaluating your plan every three to five years.
Whether the impending drop in the estate tax exemption is averted or not by Congressional rulings, “Who Cares?” is hardly a beneficial approach to estate planning!
– by Cara Chittenden, Attorney with Rebecca W. Geyer & Associates