Will the Election Impact Your Estate Taxes?

People are concerned that estate taxes will be affected by the election. Should you update (or create!) your estate plan before the election or before a new administration takes office? 

The truth is that the federal estate tax laws passed under the 2017 Tax Cuts and Jobs Act (TCJA) will be sunsetting, or expiring, at the end of 2025 regardless of who wins the election. Currently, the federal estate tax exemption amount is $13.6 Million. That means that an individual can pass up to $13.6 Million, double that amount for married couples, free of estate taxes. At the end of 2025, that figure will return to 2017 levels of $5 Million per person (adjusted for inflation). 

We are experiencing a moment of great opportunity as the current estate tax exemption amount is higher than it has ever been throughout history! Here are some strategies to consider:

SLAT: A Spousal Lifetime Access Trust is a tax planning vehicle for spouses and descendants that allows your spouse to be a permissible beneficiary of the trust during his/her lifetime. The trust can be flexible and works well to accomplish estate tax protection while not excluding your spouse from having access to the trust’s assets.

Dynasty Trusts: This trust can be set up for children, grandchildren, and many more generations to come while protecting each generation from any estate or gift tax. 

ILIT: Irrevocable Life Insurance Trusts are used to own and hold life insurance policies that can both remove the value of life insurance from your taxable estate and provide liquidity for your estate to pay any estate tax liabilities that may exist. 

Charitable Trusts: There are various types of charitable trusts that can provide income to you, your beneficiaries, or your charity of choice, with a pay out to your heirs or the charitable organization at the end of a term. 

Gifting/Annual Exclusion Gifting: The federal estate tax is unified with the federal gift tax so the $13.6 Million exemption can be used either during life, by your estate, or in part by both. In other words, you can use a part of your exemption amount during your life and the remainder can be used by your estate. With the historically high exemption amount until the end of 2025, you may wish to make a large lifetime gift to your heirs. You may also wish to take advantage of annual exclusion gifting of $18,000 (2024) per beneficiary/per year. This is the amount you can give free and clear, without having to report the gift to the IRS and without it counting toward your lifetime gift and estate tax exemption amount.

In each of these scenarios, you are removing assets and their appreciation from your taxable estate, allowing the assets to grow tax free for your beneficiaries.   

Every individual’s and family’s situation is different. Contact the knowledgeable and experienced estate and tax planning attorneys at Cona Elder Law for a customized plan tailored to your exact needs by calling 631.390.5000 or elder@conalaw.com. 

Jennifer B. Cona, Esq. is the Founder and Managing Partner of Cona Elder Law, an award-winning law firm concentrating in the areas of elder law, estate planning, special needs planning, estate administration and litigation, and health care law. The firm has been ranked the #1 Elder Law Firm by Long Island Business News for eight consecutive years.  For additional information, visit www.conaelderlaw.com.

This article was originally published in the November 2024 issue of the Long Island Press, Power of Your Attorney.