Are you prepared for estate plan tax law changes?

As we begin 2025, it’s important to be aware of the upcoming changes to U.S. tax laws that could impact your estate plan. These changes come as the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire at the end of 2025. Here’s a quick rundown of what to expect and how it might affect your estate plan.

Key Changes to Watch

1. Estate and Gift Tax Exemptions: Currently, each individual can pass on up to approximately $13.6 million of assets without facing estate or gift taxes. However, after Dec. 31, 2025, this exemption is set to drop back to approximately $5 million. This means, if the total value of your assets is worth more than this amount, you could face hefty estate taxes. There are strict guidelines that determine who, what, where and how much with regards to asset valuation, therefore careful planning is key. Outside of this Federal Act, the state of Massachusetts has its own additional estate tax liability for individuals holding more than $2 million in assets.
2. Income Tax Rates: While the focus of this post is primarily on estate and gift tax provisions, it’s important to note that other parts of the TCJA, such as income tax rates and brackets, are also set to revert to their pre-2018 levels, which could affect long-term financial planning.

How This Affects Your Estate Planning

1. Take Advantage of your Exemption: There are multiple ways to decrease or eliminate estate taxes, particularly with lifetime gifting to heirs or charities.
2. Update Your Estate Plan: Review your current estate plan to ensure it’s still effective under the new exemption limits. You may need to adjust strategies involving your current assets, goals and concerns within your current trusts and other estate planning tools.
3. Think About Trusts: Tax Trust planning is necessary to take advantage of the full estate tax exemption amounts, particularly for married couples, on both the state and federal levels. If you have trusts set up, check their terms to make sure they still align with your goals and the upcoming tax changes. Failure to plan may cause tens or hundreds of thousands of dollars in tax liability; however, proper planning may decrease or eliminate tax liability entirely, thereby passing more of your assets on to your family.

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