The current estate and gift tax exemption is set to expire at the end of 2025. This could lead to a significantly higher estate or gift tax liability, affecting many high-net-worth individuals. In anticipation of this change and the upcoming U.S. presidential election, we encourage anyone who might be interested in reviewing their estate plan to consider discussing this with their trusted professional.
The Historically High Estate and Gift Tax Exemption
The Tax Cuts and Jobs Act (TCJA) enacted in 2017 doubled the lifetime estate and gift tax exemption from its previous levels for U.S. citizens and domiciliary individuals (“U.S. Persons”). Currently, the lifetime exemption is $13.61 million per U.S. Person and $27.22 million for a married couple. This means that in 2024, a U.S. Person may gift up to $13.61 million and a married couple up to $27.22 million (during their lifetime or upon their death) without incurring any federal estate or gift tax. Estates and gifts exceeding the exemption amount are taxed up to 40%. In 2025, the lifetime exemption amount will be further adjusted for inflation.
Without further legislative action, the lifetime estate and gift exemption amounts are will return to 2017 amounts in 2026. Including any adjustments for inflation, the lifetime estate and gift exemption amounts could be lowered to an estimated $7 million per U.S. Person, and about $14 million for a married couple.
How Setting up a Trust Can Help
There are many estate planning options to consider before the sunset of the increased estate and gift tax exemption. One common option is to gift up to the increased exemption amount into an irrevocable trust.
For example, if a U.S. Person settles an irrevocable trust for the benefit of their children and descendants in 2024, the settlor can gift up to $13.6 million to the irrevocable trust without incurring any federal gift tax (assuming no lifetime exemption was ever used). In addition, a properly structured irrevocable trust could also ensure that the assets in the trust would not be treated as the estate of the settlor (nor the settlor’s children and descendants), thus reducing the settlor’s taxable estate.
The Cone Marshall Group
The Cone Marshall Group is a global, independent fiduciary firm with its roots in legal service and trust administration. The Group consists of lawyers, accountants, wealth planners, and bankers. We specialize in advising on how to securely and efficiently hold wealth, as well as plan for its succession to future generations.
Our U.S. business, Teton Trust Company, is a Wyoming State chartered trust company headquartered in Jackson Hole, Wyoming with representative offices in Miami and New York. Teton Trust Company provides a full suite of trust services, including establishing and overseeing all types of trusts and trust assets, including irrevocable and revocable trusts, directed trusts, asset protection trusts, private family trust companies, foundations, and Wyoming LLCs.
Our team of professionals work closely with our network of lawyers, family advisers, private banks, trustees, and related institutions to ensure the security and preservation of global wealth.
Disclaimer
This client alert and the information contained herein is for informational purposes only and is subject to changes and should not be relied upon as legal, accounting or tax advice. The Cone Marshall Group is not, by means of this client alert and information contained herein, rendering accounting, business, financial, investment, legal, tax, or other personal advice or services. This client alert and information contained herein is not a substitute for such personal advice or services, nor should it be used as a basis for any decision or action that may affect your affairs.
Before making any decision or action that may affect your affairs, you should consult a qualified professional advisor or attorney. The Cone Marshall Group shall not be responsible for any loss sustained by any person who relies on this client alert and the information contained herein.
Contact Us
Ada Wai Shan Ng
Managing Director
Head of Greater China
+852 3622 2195
David Bertsch
Head of Legal and Fiduciary Services, United States
dbertsch@tetontrustcompany.com
+1 (307) 201-5275 ext. 6