The outcome of the recent election has some Americans asking how the federal estate tax exemption might be affected. This is an especially important topic for estate planning, given that the current exemption rate is set to change unless new legislation is enacted. At Mathews Law, we’re here to help you understand the current law, anticipate possible changes, and take a thoughtful approach to planning your estate.
Current Law on the Estate Tax Exemption
The federal estate tax exemption is currently at an all-time high. For 2025, individuals can pass on $13.99 million tax-free, while married couples can transfer up to $27.98 million without being subject to federal estate taxes. This increase stems from the Tax Cuts and Jobs Act (TCJA) of 2017, which doubled the previous exemption amount.
However, this high exemption is temporary. Unless Congress takes action, it will sunset at the end of 2025, reverting to pre-2018 levels adjusted for inflation. Experts estimate the exemption will drop to around $7 million per individual at that time.
For families with significant estates, this looming reduction may create urgency to explore strategies like making lifetime gifts or setting up irrevocable trusts to take advantage of the current higher exemption. But before jumping into action, it’s critical to consider what a second Trump presidency and a GOP-controlled Congress could mean for the estate tax.
The Potential Impact of a GOP-Led Majority and Second Trump Presidency
The new GOP-majority in Congress and President Trump’s return to the White House make it highly likely that efforts will be made to extend the current estate tax exemption or make it permanent. Trump has consistently advocated for extending his tax cuts, and with GOP control of both the House and Senate, he may have the support needed to enact such changes.
That said, the timing is critical. Congress would need to act by the end of 2025 to prevent the exemption from reverting to lower levels. The estate tax is just one piece of broader tax legislation that will need to be negotiated, which could complicate or delay the process.
Estate planning professionals are closely watching these developments, as they may create new opportunities or challenges for individuals with substantial estates.
Caution Before Taking Any Drastic Action
While it’s natural to feel pressure to act quickly in response to uncertainty, it’s essential to approach estate planning with caution. Some financial services providers are already marketing strategies, such as irrevocable trusts, as a way to “lock in” the current exemption. However, these strategies are often costly, complex, and difficult—or impossible—to undo.
Given the GOP majority in Congress, there is a reasonable chance the exemption could be extended before the end of 2025. Acting too soon could result in unnecessary expenses or restrictions on your assets. At Mathews Law, we recommend a balanced approach that prioritizes flexibility while staying prepared for potential changes.
Stay Prepared, Not Reactionary
For now, the best course of action is to stay informed, review your estate plan regularly, and remain cautious about implementing irreversible strategies. With potential legislative changes on the horizon, it’s crucial to consult with an experienced estate planning attorney who can guide you through this evolving landscape.
If you’re concerned about how the potential sunset of the estate tax exemption could impact your estate, or if you want to discuss strategies for the future, Mathews Law is here to help. When you’re ready, we’re ready. Schedule a time to chat to get started. Together, we’ll ensure your estate plan is designed to meet your needs, no matter what changes lie ahead.