With January 1, 2026 on the horizon, there’s a significant planning opportunity to be taken advantage of prior to the sunsetting of the temporary increased lifetime gift and estate tax that was part of the Tax Cuts and Jobs Act of 2017. For both the affluent and the moderately wealthy, this expiration brings with it a narrowing window to take advantage of increased gifting capacity. In this blog, we’ll delve into the importance of leveraging this exemption, especially for those looking to strategically transfer assets with high growth potential out of their taxable estate.

Understanding the Lifetime Gift Exemption

The lifetime gift exemption, a provision in the federal estate tax laws, allows individuals to gift a certain amount of assets during their lifetime without incurring gift tax. In 2024, this exemption stands at $13.61 million per individual, or $27.22 million for a married couple. However, this exemption is set to revert to pre-2018 levels on January 1, 2026, potentially dropping in the range of $5 million per individual adjusted for inflation.

Importance for the Moderately Wealthy

 While the term “lifetime gift exemption” might sound like it’s exclusively for the ultra-wealthy, it’s crucial for moderately wealthy individuals to pay attention as well. With the potential for assets like real estate, stocks, and businesses to experience substantial appreciation over time, many individuals who may not consider themselves extremely affluent could find their estates subject to significant taxation.

Seizing the Opportunity

 Tax Efficiency: By gifting assets now, individuals can take advantage of the higher exemption amount to transfer substantial wealth to their heirs and potentially reduce the overall estate tax burden.

High Growth Potential: Gifting assets with high growth potential out of the taxable estate allows for the appreciation on those assets to occur outside of the estate, resulting in substantial tax savings.

Family Legacy Planning: Beyond tax considerations, gifting assets allows for strategic family legacy planning. By transferring wealth during one’s lifetime, individuals can actively participate in shaping their legacy and supporting their heirs in meaningful ways, such as funding education, business ventures, or charitable initiatives.

The Clock is Ticking

Proactive families have already begun to take advantage of this unique planning opportunity and while it may seem like there is still plenty of time, advisors in the Trust & Estate community, including attorneys, financial planners and CPAs are already experiencing heavy increases in time demands.

Taking advantage of the current exemption levels, while also leaving enough time for thoughtful planning, can lead to significant tax savings and provide an opportunity to strategically transfer assets with high growth potential out of the taxable estate. As we navigate these financial waters, it’s essential to consult with a knowledgeable financial advisor to ensure that your wealth is being preserved and passed on to future generations as efficiently as possible. Don’t miss the chance to take control in creating a plan with purpose and maximizing your family wealth – act now before this window of opportunity closes.

_{Sources: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
https://www.irs.gov/newsroom/treasury-irs-making-large-gifts-now-wont-harm-estates-after-2025
https://smartasset.com/taxes/ct-gift-tax}

_{Neither MML Investors Services nor any of its subsidiaries, employees or agents are authorized to give legal or tax advice. Consult your own personal attorney, legal or tax counsel for advice on specific legal and tax matters.  CRN202605-5951311}