The Tax Cuts and Jobs Act of 2017 (TCJA) substantially increased the federal estate and gift tax exemption, but these provisions are set to expire at the end of 2025. Without congressional action, the exemption will be cut in half—from $13.99 million per individual and $27.98 million for married couples filing jointly in 2025, down to about $5 million per individual and $10 million per couple in 2026. For estates that surpass these thresholds, this reduction could mean a substantial tax burden.
Since 2018, the TCJA has allowed individuals to transfer significantly more wealth tax-free. For example, in 2025, a married couple could gift their child $38,000 tax-free (thanks to the annual gift exclusion of $19,000 each), plus an additional $27.98 million using their lifetime exemption. However, the IRS has confirmed that gifts made under the current exemption will not be subject to a “clawback” later—even if the exemption decreases in 2026.
So, what does this mean for you? It’s a prime time to fine-tune your estate plan using a few of the following gifting strategies.
Irrevocable Trusts: Transferring assets into an irrevocable trust removes them from your taxable estate. You can establish distribution terms and designate beneficiaries, ensuring your wealth is managed according to your wishes.
Spousal Lifetime Access Trust (SLAT): This is a trust where one spouse creates a trust for the benefit of the other spouse. The beneficiary spouse can access distributions for shared expenses, reducing the taxable estate while maintaining financial security. Upon both spouses’ passing, assets transfer to heirs free of additional estate taxes.
Dynasty Trusts: These trusts are designed to preserve wealth for generations. By keeping assets outside of the taxable estate, it ensures that wealth can be passed down to your descendants with minimal tax impact. This type of trust can ensure your legacy endures, benefiting future generations for years to come.
Irrevocable Life Insurance Trusts (ILIT): By placing a life insurance policy in an ILIT, the death benefit is excluded from your taxable estate. This strategy can provide liquidity to cover estate taxes without putting the tax burden on your beneficiaries.
Qualified Personal Residence Trust (QPRT): A QPRT lets you transfer your home into a trust while retaining the right to live there for a set period. After that time, ownership transfers to your beneficiaries at a lower tax cost.
Even if the provisions of the TCJA are extended, it’s still crucial to regularly review your estate plan. Laws change, financial circumstances evolve and your personal goals may shift. Waiting could limit your options and reduce the tools available to protect your wealth. You’ve worked hard to build your legacy, so ensuring that the next generation—your children, grandchildren, and beyond—benefit from it should be a key focus now.
Sean Goodrich is a CFP® for Raymond James through Goodrich Wealth Planning. He can be reached at sean.goodrich@raymondjames.com
