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Are You Prepared for an Estate Tax Sunset? (TCJA)

Are You Prepared for an Estate Tax Sunset? (TCJA)

September 15, 2022

Are You Prepared for an Estate Tax Sunset? (TCJA)


The federal estate tax threshold, which is the amount of money that can be passed on to heirs without being subject to estate tax, experienced a significant increase under the Tax Cuts and Jobs Act (TCJA) in 2022. For married couples, the threshold rose to $24.12 million, while for individuals it rose to $12.06 million. This increase provides a temporary relief for individuals and families with significant wealth, as it allows them to transfer a larger amount of assets without incurring estate tax.

However, it’s important to note that this higher estate tax limit is NOT permanent! As with several other provisions of the TCJA, this increased threshold is set to expire in 2025. Unless Congress takes action to extend or modify the law, the estate tax exemption amount will revert back to around $6.2 million, adjusted for inflation, in 2026. Additionally, the current maximum gift and estate tax rate of 40% will also increase to 45%.

This potential sunset of the higher estate tax limit and the increase in the tax rate could have implications for high-net worth individuals and their wealth transfer strategies. It may prompt them to reevaluate their estate planning and explore different options to minimize the impact of estate taxes on their wealth.

Despite the eventual expiration of these provisions, it’s worth noting that the sunset is still a few years away. This provides individuals and families with some time to assess their situations, consult with financial advisors and attorneys, and make informed decisions regarding their estate planning strategies. Planning ahead can help ensure a smooth transfer of wealth and minimize any potential tax burden for future generations.


About the Author:

Damon Paull is a Marine Corps veteran who has traveled to over 20 countries. As a financial advisor in Houston, Texas, he is passionate about helping business owners and individuals achieve their financial goals. You can connect with Damon and his team at: 703.362.5747 or DPaull@totuswm.com.