Record-high estate tax exemptions are scheduled to sunset in 2025. Planning in advance is key to taking advantage of opportunities — and avoiding donor remorse.
The High Cost of Rushed Planning
Current estate tax exemption rates are the highest they have been in history, allowing individuals an unprecedented $13.61 and married couples $27.22 million to give away during life or death tax free. The temporary exemption, however, is scheduled to sunset on December 31, 2025 — at which point, barring action by Congress, it will revert to approximately $7 million per individual, adjusted for inflation.
Current exclusion levels represent a significant opportunity. In similarly fluctuating tax environments, however, we have observed some families acting precipitously as deadlines approached. In our report, we discuss action items for optimizing your plan across tax environments as well as examples of potential planning missteps, including:
- Completing a gift to an irrevocable trust with liquid, rather than harder-to-value, assets due to time pressures, resulting in insufficient liquidity later in life
- Gifting company stock to trust that later saw unexpected, spectacular growth — without modeling alternative tools that would have ensured access to the funds
- Gifting retirement assets to trust without a complete understanding of the structure, resulting in more restricted access and control than anticipated
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Lifetime gifting has numerous advantages. But modeling the universe of strategies for an array of potential tax environments takes considerable time, coordination and decision-making.
In this report, we discuss strategies and action items for optimizing your plan, including how Northern Trust’s Goals Driven process can help you model how tax changes and potential gifting will impact your goals, liquidity and complete tax picture, both during your lifetime and for your beneficiaries.
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