May 13, 2025
Estate planning is an essential part of financial management, and with major changes expected in 2026, individuals with significant assets should take proactive steps to minimize their tax burden.
Estate and Gift Tax Exemptions
For 2024, the federal estate and lifetime gift tax exemption is $13.61 million per person ($27.22 million per couple). However, without legislative action, this exemption is expected to drop by nearly half in 2026.
The annual gift tax exclusion has also increased:
- $18,000 per recipient in 2024
- Expected to rise to $19,000 in 2025
This means individuals should consider making large gifts before the potential reduction.
Impact of the Secure Act on Inherited IRAs
The SECURE Act eliminated the ability for most non-spouse beneficiaries to stretch IRA distributions over their lifetime. Now, most inherited IRAs must be fully distributed within 10 years, potentially leading to higher tax liabilities.
State-Level Estate Taxes
While the federal estate tax exemption is high, states like Maryland and D.C. impose estate taxes with much lower thresholds. Maryland also has an inheritance tax, which is separate from its estate tax.
What to Watch for in 2025 and Beyond
- Unless Congress votes to renew the legislation, the estate tax exemption will be reduced by approximately half after 2025.
- State estate and inheritance taxes continue to apply in many states.
- SECURE Act rules on inherited IRAs remain in effect, requiring careful planning.
Key Strategies for Estate Planning
- Use the current high exemption by making large gifts before 2026.
- Utilize Spousal Lifetime Access Trusts (SLATs) to shift wealth while maintaining some control.
- Consider charitable giving strategies, such as Donor Advised Funds or charitable trusts, to reduce taxable estates.
GRF Can Help
With the estate tax exemption likely decreasing, now is the time to reassess your estate plan. Whether through gifting, trusts, or charitable contributions, proper planning can help protect your legacy. Consulting with an estate planning professional is essential to making informed decisions.
