Sunsetting Double Estate Tax Exemptions in Florida: Take Action Before 2026

One of the most celebrated moves by the previous administration was the Tax Cuts and Jobs Act. A key element of this bill was an increased federal estate tax exemption. Thanks to this double exemption, countless high-net-worth families avoided incurring excessive taxes. If you are building a high-net-worth estate plan in Tampa, this exemption could benefit you and your family to a considerable degree. However, the double estate tax exemption is set to expire. How can you plan for this possibility?

 What Does “Sunsetting” Mean for the Estate Tax Exemption? 

When a law “sunsets” it expires. Many bills – including the Tax Cuts and Jobs Act of 2017 – have built-in sunset clauses. When the double estate tax exemption sunsets, the exemption will go back to its default amount. In other words, it will be halved. When the double tax exemption went into effect back in 2017, the exempted amount increased from about $5.5 million to $11 million.

However, the exemption also increases automatically each year due to inflation adjustments. Since 2017, the total exempt amount has risen to over $14 million. As a result, the exemption after the sunset in 2026 will decrease to approximately $7 million. When this occurs, high-net-worth families could lose $7 million of federal estate tax exemptions.

How Do I Prepare for the Sunsetting Double Estate Tax Exemption? 

There are a few steps you can take to prepare for the double estate tax exemption. The first option is a gifting strategy. The tax exemption applies to both estate taxes and gifts. As a result, families can take advantage of these exemptions by providing gifts before the sunset. For example, one spouse might give a cash gift to their spouse. Couples might also initiate gifting strategies to beneficiaries, allowing them to receive exempt inheritance before anyone passes away.

Another option is a trust, and there are many types of trusts you can discuss with a Tampa estate planning attorney. If you have grandchildren and other young beneficiaries, you could also set up an education fund. As long as you move cash into the fund before the estate tax exemption sunset, the funds may be exempt from additional taxation.

What If the Sunset Never Happens? 

You also need to consider the possibility of the double estate tax exemption remaining in place. The fate of this exemption could rest on the outcome of the US elections, and various lawmakers are already trying to keep it going past 2026. Because of these uncertainties, it may make sense to delay action until after the election if at all possible.

Find an Experienced Estate Planning Attorney in Tampa 

If you’ve been searching for an experienced estate planning attorney in Tampa, look no further than Knudsen Law. While the sunsetting of the estate tax exemption is an important concern, there may be many other topics worth discussing during your initial consultation. Each estate plan is unique, and a personalized approach can help you meet your unique goals. Instead of continuing with online research, consider contacting us today for further information.

Sources: 

forbes.com/sites/forbesfinancecouncil/2023/10/25/using-the-federal-estate-gift-tax-exemption-before-it-sunsets/

ers.usda.gov/amber-waves/2024/march/farm-households-face-larger-tax-liabilities-when-provisions-of-the-tax-cuts-and-jobs-act-of-2017-expire/