Sedona Arizona

Estate Planning Adjustments To Consider before 2026

With potential changes to tax laws coming in 2026, now is the perfect time to revisit your estate planning strategies.

The Tax Cuts and Jobs Act of 2017 (TCJA) increased the federal estate tax exemption to $13.61 million per person, or $27.22 million for married couples. With such high limits, many Americans haven’t needed to worry too much about estate planning or gifting strategies. If the TCJA sunsets in 2026, the exemption will drop to about $6 million (adjusted for inflation).

Key Points to Consider:

  • Estate Tax Exemption: The decrease means more estates will be subject to federal estate taxes.
  • Gift Tax Exemption: Similar reductions are expected, which could affect your gifting strategies.
  • Income Tax Changes: Expect adjustments in tax brackets and rates

The Federal Reserve’s report on U.S. Family Finances from 2019 to 2022 shows the average net worth of American families is $1.063 million. As this number grows more people will need to tweak their estate planning strategies to stay tax-efficient.

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Smart Estate Strategies to Consider

1. Gifting Strategies:

  • Use the Higher Gift Tax Exemption Now: Consider making larger gifts to your heirs to reduce your taxable estate.
  • Annual Gift Exclusion: For 2024, the annual gift exclusion is $18,000. This means you can give up to $18,000 to anyone each year without having to worry about taxes or reporting it.

If you give more than the annual exclusion, you’ll need to file IRS Form 709 to report the extra, which then reduces your lifetime gift exemption.

Example: Your grandparents want to give you $50,000 toward a down They will need to report the remaining $14,000 on Form 709, which will then subtract from their lifetime exemption.

2. Irrevocable Trusts:

  • Set Up Irrevocable Trusts: These trusts can remove assets from your taxable estate and provide protection.
  • Explore Different Trusts: Consider options like Grantor Retained Annuity Trusts (GRATs), Irrevocable Life Insurance Trusts (ILITs), and Dynasty Trusts for estate tax benefits.

Keep in mind that irrevocable trusts are, well, irrevocable. This means you can’t easily change, take back, or manage those assets anymore. Instead, a trustee (someone you choose) will manage them according to the rules you set up in the trust. While giving up control might seem like a downside, it also offers benefits like protecting your assets from creditors and possibly reducing taxes, which can make it a useful tool for some estate planning needs.

3. Review and Update Your Estate Plan:

  • Regular Reviews: With the upcoming changes, make sure to review your estate plan regularly.
  • Work with Professionals: Make sure your financial advisor and estate planning attorney are working collaboratively to adjust your strategies.
  • Consider All Elements: Make sure your retirement accounts, business succession plans, and charitable giving are all up to date.

It’s a good idea to check in on your estate plan and beneficiary designations every 3-5 years or whenever big life events happen, like births, deaths, divorces, or when your kids become adults. Make sure your chosen trustees and guardians are still the right fit for the job. Regular reviews help ensure everything stays up-to-date and works as you intended.

4. Use Tax Exemption Portability:

  • Estate Tax Exemption Portability: This allows a surviving spouse to use any unused portion of the deceased spouse’s exemption.

Review your estate planning needs now

These potential tax law changes in 2026 rest squarely on the results of the 2024 election. The White House and the controlling parties of the House and Senate will decide how to extend, revise, or let the provisions of the TCJA sunset.

Review your estate planning needs now to better prepare for any changes that lie ahead. Download our free guide to understand what estate planning issues you may need to consider.

Ready to talk about how to get your estate planning needs aligned with your financial planning and investment strategy? Click here to schedule time to meet.


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Author: Dale Shafer II, CFP®, APMA®, CDFA®

The National Association of Personal Financial Advisors
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