Planning For A Secure Future

Be ready for potential estate tax changes

On Behalf of | Feb 1, 2024 | Estate Planning

Currently, the estate tax exemption stands at $13.61 million per individual and $27.22 million per married couple. However, if nothing changes, exemption amounts could be cut by as much as 50%, which means that California residents may need to make changes to their estate plans.

Exemption amounts as of 2026

In 2026, exemption amounts could be as little as $7.5 million per person and $14.5 million for married couples. The exact amount will depend on inflation rates over the next two years. This also assumes that the Tax Cuts and Jobs Act that created the temporary estate planning flexibility is not renewed or restored at some point in the future. It’s also possible that exemption limits will begin to increase again as they will be indexed for inflation after 2026.

How to prepare for potential changes

There are a number of steps that you can take today to prepare for changes to estate tax laws. For instance, you can reduce the value of your estate by making gifts prior to your passing. You can also put assets into a trust, which would not be considered a part of your estate for tax purposes. Finally, you can consider putting a portion of your exemption into a trust for the benefit of children, grandchildren or other potential heirs.

Ideally, you will review your estate plan once a year to determine if it still meets your needs. It may be a good idea to do so more frequently after major life events such as a birth or death in the family. Changes to the tax code should also trigger a review to ensure that an existing trust, gifting strategy or other plan components are sufficient to meet your needs.