The estate tax is a key consideration for families planning their financial future. In 2017, the Tax Cuts and Jobs Act (TCJA), sometimes referred to as the Trump Tax Cuts, significantly increased the federal estate tax exemption, making complex tax planning unnecessary for many Americans. However, these provisions are set to expire at the end of 2025 unless Congress acts to extend them.
In this article, we’ll explore what the sunset of the estate tax cuts could mean and how you can ensure your estate plan is ready—whether your estate falls above or below the exemption limit.
Current Estate Tax Exemption Limits
Under the TCJA, the federal estate tax exemption for individuals increased to approximately $13.99 million in 2025, with annual adjustments for inflation. Married couples can double this amount, with the help of legal counsel, protecting almost $28 million from estate taxes.
If the cuts expire, the exemption will revert to pre-2017 levels, approximately $5 million per individual (adjusted for inflation). This change would subject significantly more estates to federal estate taxes.
Will the Estate Tax Cuts Be Extended?
Whether the estate tax cuts will be extended depends on several factors, including political control of Congress and public sentiment. Historically, estate tax policy has been a point of contention between political parties:
- Supporters of Extension argue that maintaining the higher exemption levels prevents families from being forced to sell assets like family farms or businesses to pay estate taxes. They also contend that the current levels reduce the complexity of estate planning for middle- and upper-middle-class families.
- Opponents of Extension argue that the estate tax only affects the wealthiest individuals and that reverting to lower exemption levels ensures the ultra-wealthy contribute their fair share to public revenue. They also argue a lower exemption amount may help lower national debt, a looming concern for many.
After the 2024 election, the composition of elected officials closely mirrors that of the Congress that initially passed the TCJA. However, Donald Trump’s campaign promises for additional tax cuts, such as eliminating taxes on Social Security benefits, tips, and overtime pay, may require negotiation to gain support. To achieve these goals, compromises could be made in other areas, including estate taxes, leaving the future of the current exemptions uncertain.
Advanced Planning for Larger Estates
Many of the most effective estate tax avoidance strategies—such as gifting programs, irrevocable trusts, and family limited partnerships (or family limited liability companies)—require thoughtful planning and ample time to implement. These techniques often depend on annual exclusions, valuation discounts, and multi-year structures that simply can’t be rushed or created at the last minute. Waiting until the 11th hour often eliminates the opportunity to use these tools effectively, leaving families exposed to unnecessary tax liability. Planning early allows for greater flexibility, better results, and the ability to preserve more wealth for future generations.
Preparing for the Future
Here’s how you can prepare for the potential sunset of the tax cuts:
- Review Your Estate Plan
Ensure your current plan aligns with your goals and considers the potential reduction in exemption limits. - Explore Trust Options
For smaller estates, a revocable living trust simplifies estate administration and avoids probate. For larger estates, advanced trusts can help mitigate tax burdens.
Final Thoughts on Estate Tax
While the future of the estate tax cuts remains uncertain, proactive planning is essential. Whether your estate falls under the exemption or exceeds it, taking action now can protect your family’s assets and ensure your wishes are honored.