Most Americans are not subject to the federal estate tax because an exemption exists that allows a certain amount of assets to be passed on to heirs free of taxation. Currently, the federal estate tax exemption stands at $13.6 million per single individual and twice that for someone who is married. However, that is not a permanent rate, and unless Congress takes action, the estate tax exemption will decrease sharply at the end of 2025.
If the estate tax increase established in 2017 is allowed to sunset, the individual exemption would likely be reduced to approximately $7 million. Many families that wouldn’t be affected by the estate tax currently would face substantial exposure under the reduced exemption. Others with currently taxable estates would lose much more than they anticipated in the transfer of wealth during probate. The looming expiration of the current exemption underscores the urgency for individuals to review their estate plans and consider the potential implications of a decreased exemption on their financial legacy.
High-net-worth individuals may need to reevaluate their succession plans and explore alternative strategies for passing wealth to future generations while minimizing tax burdens. Additionally, business owners and individuals with complex financial holdings may face heightened challenges in structuring their estates to optimize tax benefits. In light of these potential changes, purposeful estate planning is more important than ever. Regardless of your specific circumstances or changes to the estate tax rules, speaking with a knowledgeable trusts and estates attorney is the best way to learn about your options. If you plan in advance, there are numerous ways to shift assets to loved ones outside of your estate, such as:
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Placing assets in a trust with instructions on when and how they should be distributed to named beneficiaries
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Moving funds to jointly owned accounts or those that are payable on your death to someone you designate
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Transferring wealth through life insurance proceeds
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Making strategic gifts and charitable donations during your life to lower the size of your estate
Don’t put your family at risk by leaving them with an outdated estate plan. The attorneys at Abernethy & Hagerman, LLC will advise you regarding the laws that affect you and possible changes that might be ahead. From our office in Allison Park, we assist residents of Gibsonia, Franklin Park, Bakerstown, West View, Hampton Township, McCandless Township, Wexford, Glenshaw and other Western Pennsylvania communities. Please call 412-486-6624 or contact us online for a consultation regarding your specific situation and needs.