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Estate Planning Is Changing In 2026— Here’ s How
Clients will want to act soon to get ahead of sunsetting estate tax provisions.
By Mary P. Burns
AS THE SUN SETS ON THE TAX CUTS and Jobs Act at the end of 2025, the landscape of estate planning will undergo a significant shift. The current estate tax exclusion amount, which allows individuals to pass up to $ 13.99 million to heirs free of estate tax, is set to drop to approximately $ 7 million per person( adjusted for inflation) and $ 14 million for couples. These reductions will have profound implications for wealthy individuals and families, leaving many clients wondering how their plans will be directly affected.
When the estate tax exemptions revert to pre-2017 levels on December 31, 2025, the amounts over those exemptions will be subject to 40 % estate taxes. The reduction in the exemption amount will lead to a greater number of estates facing tax liabilities. In some cases, estates could also trigger the generationskipping transfer( GST) tax, an additional 40 % tax applied to transfers to heirs beyond the immediate next generation.
While there is a possibility Congress could extend the higher exclusion amounts, it’ s not certain to happen. So it’ s advisable for individuals and families to assess their estate plans now and explore strategies to minimize potential tax liabilities in light of the current law.
Planning Strategies To Consider Before 2026
After all, clients can use estate and gift tax exclusion amounts over their lifetimes. That means they can still take advantage of the higher exclusion amounts available in 2025 before they de- crease and they should consider implementing estate planning strategies now. Here are a few steps they can take:
• They can gift assets now: By making significant gifts to heirs( either outright or in trust) before the exclusion decreases, they can take advantage of the higher exclusion amounts.
• They can establish trusts: Irrevocable trusts can remove assets( and the growth of those assets) from an individual’ s taxable estate.
• They can make business succession plans: By transferring their business ownership interests before 2026, your clients can reduce future estate tax liabilities and take advantage of valuation discounts.
• They can take advantage of charitable giving: Donor-advised funds and charitable trusts can serve as effective tools for clients who want to curtail their estate taxes while also fulfilling philanthropic goals.
• They can consider the impact of taxes in their particular states: Some states impose additional estate or inheritance taxes, making planning even more critical for those in hightax jurisdictions.
54 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2025 WWW. FA-MAG. COM