Which Way Will Estate and Gift Tax Exemptions Go?

The gift and estate tax exemptions are anticipated to increase to $13,610,000 in 2024, compared to $12,920,000 in 2023. Unless tax law changes are enacted in the coming two years, on January 1, 2026, the exemption amount is set to automatically revert back to the credit in effect in 2017 ($5,490,000) with inflation adjustments for the intervening years—estimated to be about $6.5 million. This provision was included in the Tax Cuts and Jobs Act of 2017.

Clients with net worth in excess of $6 million should plan in the coming years to revisit estate documents to take advantage of the higher amounts and to structure estate plans in the event the exemption drops. This could include:

• The creation of charitable remainder trusts, providing the donor with payments for life, a current income tax deduction and an estate tax deduction for amounts passing to charity at the trust’s end.
• Funding of charitable lead trusts that will pass corpus to children and/or grandchildren while gift tax and generation-skipping transfer tax exclusions are high.
• A review of beneficiary designations on qualified retirement accounts to determine if part should pass to remainder trusts or charitable gift annuities at death to make payments to family members at the owner’s death and generate an estate tax deduction.

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