Estate Planning Before 2025

September 11, 2023 | Manufacturing packs punch in Iowa's economy Brian Crotty, Managing Director, HDH Advisors, LLC,

In 2023 the Internal Revenue Service maintains a $12.92 million gift and estate exemption as part of the Tax Cuts and Jobs Act of 2017, meaning that you can leave up to $12.92 million to a spouse automatically after death without your spouse incurring a federal estate tax. However, this is not the case after 2025 and advanced estate planners have begun preparing for the change.

For the 2026 tax year, the estate or gift tax exemption is reduced by over 50% to $6.4 million. At that time, wealth transfer above that threshold could be taxed at the federal level while your beneficiaries could be levied an inheritance tax as well. The effective federal estate and gift tax rate ranges from 18% to 40% depending on the amount of the estate transfer above the untaxable threshold.

The bottom line is to rethink your estate planning for the future if you have a large estate. Here are a few other examples you can use to arrange your assets carefully and with purpose, so you can make the most of your estate.

  • Gift Business Assets – Qualified Business Appraisers such as ourselves work with business owners all the time to maximize discounts on minority interest gifts of privately held companies.
  • Set aside money through trusts – There are a variety of trust vehicles available to help you allocate and manage money purposefully, thus reducing the value of your estate after death.
  • Start 529 plans – Set up 529 college funds for your grandchildren to give them a good head start on their careers and their futures.
  • Pursue philanthropy or a foundation – Donate Company Stock or assets to a donor advised fund or cause that is already well established to secure your investment.
  • Update wills and trusts – Bonus: Update your will. Make sure you’ve updated your will to reflect these changes and updates to your estate plan.

Work with your attorney to set these vehicles in motion. If you own a business, HDH Advisors are always here to help walk you through your tax planning options or estate planning.