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  • Milad Taghehchian, CPA, CFP(R)

The Critical Importance of Estate Planning for Large Taxable Estates Before 2026

Estate planning has always been a critical task for individuals and families with significant assets. However, as we approach the end of 2025, it becomes even more imperative for those with large taxable estates to reevaluate their plans. This urgency stems from the potential expiration of the 2018 tax laws, which significantly increased the estate tax exclusion amount. Currently, the estate tax exclusion stands at about $13.61 million per individual in 2024, but if the 2018 tax laws sunset as scheduled at the end of 2025, this amount could nearly halve to around $7.5 million.

The Impending Sunset and Its Implications

The 2018 tax laws, implemented under the Tax Cuts and Jobs Act, provided substantial relief for estate taxes by doubling the previous exclusion amounts. This change allowed individuals and families to pass on more of their wealth without incurring hefty estate taxes. However, these provisions are set to expire at the end of 2025 unless Congress acts to extend them or make them permanent.

Given that 2026 is a significant election year, the political climate may make it challenging for Congress to agree on a new tax bill. Historical trends suggest that major tax legislation often comes down to the wire, and there's a real possibility that no agreement will be reached before the current laws sunset. This situation creates uncertainty and potential financial jeopardy for estates over $7.5 million, which would face substantially higher taxes if the exclusion amount reverts.

Proactive Planning Is Key

Given the substantial financial stakes and the political uncertainty, it is crucial for individuals with large estates to engage in proactive estate planning. Strategies might include making use of the current high exclusion amounts by setting up trusts or making gifts to heirs before the law changes. Additionally, exploring other avenues like life insurance policies or charitable contributions can also provide tax benefits and ensure that more of your estate goes to your intended beneficiaries rather than to tax payments.

The potential expiration of the 2018 tax laws and the return to lower estate tax exclusion amounts could have significant implications for individuals with large estates. Given the political climate and the complexities of passing new legislation in an election year, waiting to see what happens could be a costly mistake. Therefore, consulting with estate planning professionals to discuss the best strategies to mitigate potential tax increases is more crucial than ever. This proactive approach not only safeguards your assets but also provides peace of mind that your estate will be handled according to your wishes, regardless of how the tax laws may change in the future.


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