For significant savings in Florida, be prepared to make large gifts prior to 2026
The federal estate and gift tax exemption is about to be cut in half if Congress doesn’t act to preserve it. And with all the discord in Washington, who knows if that will happen? If you are planning to make significant gifts and wealth transfers in your lifetime, completing those transactions before Jan. 1, 2026, could result in significant tax savings. Any amount gifted over the exemption is taxed by the federal IRS at about 40 percent.
By having an estate plan and making large gifts before the exemption reverts, individuals can capitalize on significant tax savings and secure their financial legacies. However, success hinges on careful planning and timely action.
Preparing for the gift tax exemption to sunset
In 2017, the Tax Cuts and Jobs Act almost doubled the gift and estate tax exemption for individuals and couples. Currently, the exemption amount is about $13.6 million per person and $27.2 million per married couple. However, the provision is slated to sunset in 2026. At that point, the inflation-adjusted exemption is expected to revert to about $6 million to $7 million per person and double for couples. Here are some essential tips to help you to prepare for the change and take advantage of the larger exemption:
- Start planning now. Procrastination is the enemy of effective wealth management. Begin assessing your estate and devising a gifting strategy without delay. Whether you opt for outright gifts, trusts, or other vehicles, early planning affords you greater flexibility and control over your assets.
- Explore trust options. Trusts offer a versatile means of transferring wealth while retaining control over its distribution. Consider establishing irrevocable trusts to shield assets from estate taxes and safeguard beneficiaries' financial futures. Trusts can also provide added protection from creditors and ensure assets are distributed according to your wishes.
- Understand irrevocable trust restrictions. While irrevocable trusts offer significant tax advantages, they come with limitations. Once assets are transferred into an irrevocable trust, you relinquish ownership and control over them. Carefully weigh the benefits against the loss of flexibility before committing to this strategy.
- Consult an attorney. Given the complexity of estate planning and tax law, seeking professional guidance in establishing a savvy gift strategy is important for success. In South Florida, experienced estate planning attorney Geoff Levy can help you navigate the intricacies of gifting, trust formation, tax optimization, and other estate planning options. Based in Fort Lauderdale, The Levy Firm PLLC can also provide personalized advice tailored to your specific financial situation and goals.
For more information about the gift tax exemption, contact us
Crafting an effective gifting strategy, which may involve recapitalizations, transfers, and appraisals, demands meticulous planning. Waiting until the last minute risks running out of time before the exemption diminishes. Ideally, transfers will be made well before the end of 2025.
To learn more about how you can take advantage of the significant gift tax exemption before it expires, contact The Levy Firm PLLC for a free consultation with Fort Lauderdale estate planning attorney Geoff Levy. With more than 10 years of experience serving South Florida, Geoff has the knowledge, resources, and experience to draft a customized estate and gift plan that preserves your legacy and achieves your goals.