New Tax Bill Proposal Released, but the Clock is Still Ticking

New Tax Bill Proposal Released, but the Clock is Still Ticking
Gift and Estate Tax Exemption is Still Scheduled to Sunset on December 31, 2025 

The House Ways and Means Committee has released proposed tax legislation that would, among other things, increase the federal gift and estate tax exemption to $15,000,000 per person in 2026.^[1] The increase is proposed to be “permanent” (that is, until legislators change it again). However, despite this new proposed legislation, there is no guaranty the legislation will pass before the end of 2025. There is a lot at stake because the gift and estate tax exemption amount is currently scheduled to drop to approximately $7,000,000 per transferor at the end of 2025.   

The gift and estate tax exemption is the amount of assets that can be passed transfer tax free from an individual to their heirs. Assets transferred in excess of a transferor’s exemption amount are subject to a federal gift or estate tax (currently a 40% tax).  Wisconsin does not have a gift or estate tax, but some other states have a state gift and estate tax too. 

The 2025 exemption is currently set at $13,990,000 per person, which provides an opportunity for high net-worth individuals to use their exemptions now via lifetime gifting if they desire to do so.  If the exemption does drop at the end of 2025, a “use it or lose it” opportunity will be lost.  Many people have waited to find out what Congress will do in 2025, but those who wait any longer may find it is too late to take action if legislation is not enacted. Sophisticated estate planning and gifting strategies take time to design and implement. Anyone interested in using their exemption amount in 2025 to protect against the risk of losing the exemption should begin that planning now. 

Even if Congress does extend or permanently increase the exemption amount, high net worth taxpayers may still benefit from engaging in estate tax planning sooner rather than later. For example, early estate tax planning can shield asset appreciation from estate tax and provide some asset protection.

If you are interested in reviewing your estate plan and discussing if estate tax planning is right for you in 2025, we recommend contacting our office now to schedule a meeting.  Please reach out before July 1  to allow sufficient time for planning and implementation if you might be interested in 2025 estate tax planning. 

[1] The amount is proposed to be indexed for inflation starting in 2026.