Were you aware that as we approach 2025, it is crucial for individuals and families, not just the ultra-wealthy, to understand the potential changes in tax laws, particularly concerning estate planning?  In fact, the current estate tax exemption, a result of the Tax Cuts and Jobs Act of 2017 (TCJA), is set to expire at the end of 2025. This is a change that could significantly impact estate planning strategies. We want to share with you the need to prepare for these estate tax laws that could end in the near future.

Under the TCJA, the estate tax exemption was more than doubled. Initially, it was $5,490,000 for an individual and $11,180,000 for a married couple, indexed for inflation from a base of $5,000,000 and $10,000,000, respectively. Since then, this amount has been adjusted annually for inflation, standing at $12.92 million for individuals and $25.84 million for couples in 2023.

You need to be aware that these elevated exemption levels are temporary and are scheduled to revert to the 2017 levels, adjusted for inflation, at the end of 2025. This means a potential reduction to approximately $6 million to $7 million for an individual. This reversion could have significant implications for many families, not just those with ultra-high net worth.

Now, it is true, the future of these exemptions is uncertain and it is possible that Congress may intervene, especially considering that the lower income tax brackets set by the TCJA are also set to expire. In fact,this scenario could prompt legislative changes affecting a broad range of taxpayers, and there are a few steps you should consider taking with your experienced Florida estate planning attorney in advance including, but not limited to, the following: 

Go over your current Florida estate plan. Evaluate how the potential reduction in exemptions might impact your estate plan with your experienced Florida estate planning attorney. It is very important that you understand how your assets will be taxed and whether your current plan optimizes your tax situation.

  • You might consider utilizing the current exemption. If your estate exceeds the anticipated lower exemption amounts post-2025, it may be wise to take advantage of the current higher exemption levels through strategies such as lifetime gifts or trust formations.
  • You might want to explore trust agreements that can help you reach your goals. Specific trust agreements can be a powerful tool in Florida estate planning, offering benefits like asset protection, tax optimization, and legacy preservation. Your experienced Florida estate planning attorney will be able to help you understand the types of trusts that might be suitable for your situation.
  • You might start to consider charitable planning. Charitable contributions can provide tax benefits and help reduce the taxable value of your estate. You can consider establishing charitable trusts or other philanthropic vehicles as part of your Florida estate plan and create the legacy you want to leave to future generations.

Remember, tax laws and exemptions are subject to change. So it is important to stay informed and maintain flexibility in your Florida estate planning to adapt to any legislative changes. The potential sunset of the current estate tax exemptions in 2025 presents both challenges and opportunities in Florida estate planning. By taking proactive steps now, you can position your estate to adapt to these changes effectively. Be aware that it is not just the ultra-wealthy who need to be concerned because these changes could impact a broad range of estates. 

We know this article may raise more questions than it answers. At Perlin Estate Planning & Probate our credentials enable us to provide a multi-disciplinary approach to our legal services.  By building relationships with our clients, we are also able to understand each client’s needs and desires, and we support such goals through thoughtful, comprehensive planning techniques. We encourage you to contact us and schedule a meeting.