The estate, gift, and generation-skipping transfer (GST) tax exemptions are currently at historically high levels but are scheduled to “sunset” and be reduced by approximately half after December 31, 2025. Following the Republican sweep of the presidency and both houses of Congress in the 2024 federal elections, the future of this sunset is uncertain. President Donald Trump has promised to extend the tax cuts under the Tax Cuts and Jobs Act of 2017 (TCJA).
Estate planners have been navigating an uncertain environment since the Bush administration in 2001, which included a previous sunset of increased exemptions and even a year with no estate tax in 2010. While a further extension of the current exemption level seems likely, uncertainty remains about how long any such extension will be available due to the following factors:
- Cost Concerns: According to an analysis by the Congressional Budget Office, extending the TCJA is estimated to cost $4.6 trillion over 10 years. Additional costs may include removing state and local tax deduction limits and new provisions for exempting from income tax tips, overtime, and Social Security income, which were part of Trump’s campaign promises.
- Legislative Challenges: Although Republicans hold the majority in the Senate, the ability to engage in endless debate—more commonly referred to as the filibuster—provides a compelling reason to utilize budget reconciliation measures to pass tax legislation. Reconciliation bills have limits on debate time, thereby eliminating the filibuster, which would normally require a 60-vote threshold to end. Reconciliation also comes with its own set of challenges and rules. For more information on reconciliation and other considerations of passing legislation in Congress, see our FORsights™ article, “How Things Work—Tax Policy Resource Guide.”
- Political Dynamics: A razor-thin majority in the House and a modest majority in the Senate, along with vacancies due to presidential appointments, make passing extensions challenging. Renewed concerns among some Republicans about increasing government debt also will play a role.
Due to this uncertainty, individuals considering gift and estate transfers to take advantage of the exemption levels of $13.99 million per individual, or $27.98 million per married couple (which are the levels adjusted for inflation as of January 1, 2025), should continue to consider planning recommendations and execute necessary documents to complete wealth transfers. Utilizing the increased exemptions sooner rather than later aids in removing appreciation of gifted assets from the estate tax base. For those still uncertain about making large gifts, continuing to strategically plan and properly title assets between spouses and have documentation and agreements in place to facilitate potential gifting in late 2025 will help facilitate the execution of such plans if exemptions are not extended. Regardless of the level of exemptions available, clients should continue to pursue tax strategies such as a gifting plan using annual exemptions, charitable giving, asset protection planning, and irrevocable life insurance trusts.
How Forvis Mazars Can Help
If you’d like to learn more about utilizing the estate and gift tax exemption and planning for your estate, please reach out to a professional at Forvis Mazars.