The increased estate and gift tax exemption, which is currently $12.92 million per person and increased to $13.61 million per person for 2024, is set to sunset at the end of 2025. As a result, the exemption will drop back to the prior Tax Cuts and Jobs Act (TCJA) level of $5 million, adjusted for inflation.

These changes can create a unique planning opportunity for high-net-worth families and individuals whose estates are subject to transfer taxes. Proactively planning before the sunset may help reduce future estate, gift, and generation-skipping transfer taxes. It is important to evaluate your planning options as soon as possible, given that the estate planning process can be complex and time consuming.

Effect of the TCJA on the Estate Tax Exemption

When the TCJA went into effect, the estate tax exemption doubled for the tax years between 2018 to 2025. The exemption increased from $5.49 million in 2017 to $11.8 million in 2018 and is annually adjusted for inflation. For the year 2023, the exemption is $12.92 million per person increased to $13.61 million per person for 2024.

As a result of the TCJA, individuals and their families have additional planning opportunities.