The 2017 Tax Cuts and Jobs Act (TCJA) nearly doubled the lifetime estate and gift tax exemption from $5.6 million to $11.18 million for individuals, indexed for inflation after 2018. For 2023, the indexed exemption rose to $12.92 million ($25.84 million for married couples).
This higher exemption amount is set to “sunset,” or expire, on January 1, 2026, with the exemption amount dropping down to the amount it was in 2017. Barring congressional action, the inflation-adjusted exemption is expected to return to approximately $7 million ($14 million for married couples) in 2026, effectively reducing the exemption amount by half.
How to Adapt to the Changing Tax Landscape
Both term and permanent life insurance policies provide a death benefit, which is generally paid to the beneficiary free of federal income tax and offers a tax-efficient way to make sure your family has the resources to help with the following:
Consulting with an estate planning attorney allows you to utilize the tools available to transfer your assets more tax-efficiently. There are a variety of tools that may be used to minimize the impact of these tax changes on you, your family, and your business. Contact your Federated marketing representative to set up a meeting with our independent network of attorneys specialized in estate planning.