At Astra Fiduciary Services, we believe an estate plan is one of the most effective ways to protect your hard-earned assets, set your loved ones up for success in the future, and minimize costly court procedures like probate. But an estate plan isn’t the sort of thing you can draw up once and file away for years. The regulations surrounding inheritance are not set in stone, and your estate plan must account for current regulations — not the ones that existed when you drew up the plan.
This dynamic is all the more pressing today as we enter a moment of change in inheritance tax regulations. The 2017 Tax Cuts and Jobs Act (TCJA) introduced several regulations that dramatically changed the inheritance tax landscape for affluent families, and many are set to expire at the end of 2025. We don’t yet know how these provisions will be modified or extended. Our team of advisors can help provide guidance on how to create or modify an estate plan based on the current tax environment. Here’s what we’re looking for as we monitor the inheritance-tax landscape in the year to come.
Inheritance Tax Regulation Change on the Horizon
The TCJA produced a major shift in inheritance provisions. Under the bill, the estate and gift tax exemption—the lifetime total that an individual can pass down tax-free—doubled, growing from $5.5 million to $11 million1. In 2025, the inflation-adjusted exemption will reach $14 million2 per individual, meaning that a married couple will be able to give up to $28 million tax free to their descendants. (Anything above this threshold will be taxed at the estate tax rate, which is 40 percent3 for all estates over $1 million.)
The Generation-Skipping Transfer Tax, or GSTT, covers gifts made to descendants who are at least one generation removed from the person making the gift (defined as a beneficiary other than a spouse who is at least 37½ years younger than the donor.) This GSTT exemption stands in addition to the regulation lifetime gift exemption and stands at $14 million4 per individual in 2025. Both the lifetime gift exemption and the GSTT provisions are set to expire starting in 2026, at which point the tax exemption for both would fall to $7 million per person.
What We Expect in the Future
In a few years, we will likely look back on the 2024 presidential election as a major turning point in U.S. tax policy. With the TCJA provisions expiring, there was a major opportunity for the winning party to rewrite or reimagine the tax code. Now that we know the results of the election, it seems very likely that the incoming Trump administration and Republican Congress will look to extend the major TCJA provisions scheduled to sunset.
What does this mean for the inheritance tax? We would not expect to actually see the lifetime gift exemption drop back to $7 million. While many of the Republican proposals for new tax legislation would add trillions to the federal deficit, the estate tax is a relatively low source of income for the government: It yielded just $34 billion in FY2023, according to one report. In other words, if Republicans are forced to pare back some of their tax agenda for fear of increasing the deficit, it’s not likely to come from the estate tax.
Planning Your Estate Amid Uncertainty
Even as the direction the new administration’s tax policy will take becomes clearer in the coming months, the reality is that we remain short on specifics when it comes to the future of estate tax regulations. We believe the best estate plans at this moment are going to be the ones that have the most flexibility.
For many individuals, it may be wise to take a wait-and-see approach to your estate in this interlude period. As we approach the sunsetting of the TCJA at the end of 2025, we should have a much better idea of what new proposals for tax policy look like. At that point, families can decide whether they would prefer to make gifts under the current TCJA laws or tweak their estate plan to any new legislation and tax regulations.
Our team is here to help you plan for different contingencies based on your own financial goals and the shifting tax policy. We monitor the changing regulations to find opportunities for you. We make sure your estate plan meets your needs while minimizing your tax obligation. If you have any questions or want to discuss your estate, get in touch with us today.
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1: https://bipartisanpolicy.org/explainer/the-2025-tax-debate-individual-estate-and-gift-taxes-in-tcja/
2: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
3: https://www.irs.gov/newsroom/estate-and-gift-tax-faqs
4: https://www.nysscpa.org/most-popular-content/the-sunset-of-the-doubled-estate-gift-and-gst-tax-exclusion-amounts-after-december-31-2025-what-high-net-worth-individuals-and-family-offices-need-to-know-about-it#sthash.6tgwnvJv.dpbs
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