People who put an estate plan in place long before they anticipate it will be needed are doing the smart, responsible thing for their families and their legacy. And, it’s important to remember that estate planning is an ongoing process. Estate planning is all about the future, so it’s important to consider changes in the law when it is known (or at least anticipated) they’re going to occur.
Take the Tax Cuts and Jobs Act (TCJA). That sweeping law, which took effect in 2018, has some clear benefits for people with significant assets. It greatly increased the number of estates in this country that are exempt from estate taxes by doubling the exemption amount. That amount has increased annually in the subsequent years. It’s currently about $13.6 million for individuals and double that for married couples.
What you need to know about the TCJA’s sunset clause
When it passed the TCJA, Congress included a sunset clause. That means on the last day of 2025, this and other changes are set to end and go back to where they were in 2017 unless Congress votes to keep them or agrees to make other changes.
If this provision of the TCJA sunsets, the exemption level will drop to a level close to what it would have been without the TCJA change – about $6 million for individuals and twice that for married couples. This is just one of the provisions related to estate planning that could potentially sunset. Gift taxes are also addressed in the law, for example.
If you have the kind of assets that could be affected by whatever changes Congress decides to make (or keep) with this law, it’s crucial to keep that date of Dec. 31, 2025 in mind and start planning well in advance so you aren’t scrambling to make significant modifications at the last minute. By having experienced estate planning guidance, you’ll be better positioned to make necessary changes as the ever-shifting political winds change direction.