Estate tax planning attorneys will be busy in 2025.

Certain events make people more stressed.

Leading up to Y2K, individuals and businesses were uncertain how computers would handle the change of the millennium.

When news of possible COVID lockdowns was announced, stores quickly ran out of water, bread, and toilet paper.

According to a recent Think Advisor article titled “Act Now to Avoid Estate Planning Logjam in 2025,” the same phenomenon may present itself in estate tax planning in just a few years.

Advance planning is the key to avoiding an avoidable estate tax hangover.

Why?

The 2017 Tax Cuts and Jobs Act made significant changes to federal tax law.

One of these changes involved nearly doubling the federal estate tax exemption.

The exclusion amount was increased from $5 million to $10 million and indexed for inflation beginning in 2010.

As a result, those who die in 2023 can have $13 million of their estates exempt if they file individually and $26 million of their estate's exemption from federal estate taxes if they are married and filing jointly.

Those who benefit from this exemption will soon find “all good things come to an end.”

Why?

The exclusion provision of the 2017 Tax Cuts and Jobs Act only applies to those who die after December 31, 2017, and before January 1, 2026.

It also applies to gifts made during this period of time.

The final day for this exclusion to apply is December 31, 2025.

After this day, the exemption will return to $5 million as adjusted for inflation.

Although this is still a year and a half away, you should work with an experienced estate tax planning attorney now.

Because many people will not realize that their income and tax situations have changed, these individuals will likely wait until the last minute to meet with an experienced estate tax planning attorney.

At this point in time, appointment availability may be limited.

Additionally, people can be more strategic when they have more time to plan.

Start by assessing your net worth and the value of any assets in your taxable estate.

If you have already used some of your exemption, determine how much remains.

Gifting can be a good way to reduce the size of an estate.

You can make annual gifts without triggering a gift tax.

You can also create trusts like a generation-skipping trust to pass assets to loved ones and remove them from your estate.

Gifting to a qualified charity can efficiently and effectively remove taxable assets from your estate and reduce its size.

Meeting with your estate tax planning attorney before the end of 2025 can set you up for more successful tax planning.

Besides, no one wants to wake up to start 2026 with an avoidable estate tax hangover.

Reference: Think Advisor (May 22, 2023) “Act Now to Avoid Estate Planning Logjam in 2025”