Ending of the Tax Cuts & Jobs Act: Key Opportunities Before Exemptions Expire

At a glance

• The main takeaway: Pending potential law changes, the current estate tax exemption of approximately $13 million per taxpayer is scheduled to automatically drop to $7 million in January 2026.
• Impact on you: Time is running out on the TCJA, and if you don’t act now, you could miss out on potentially lucrative tax breaks on gifts you are planning to make to your heirs.
• Next steps: It’s important to start the estate planning and gifting process before the year is up. Contact Aprio to start the conversation.  

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The full story:

The Tax Cuts & Jobs Act (TCJA) is sunsetting, with key estate and gift tax provisions set to expire on January 1, 2026. Here at Aprio, we have tracked the pending sunset, and here’s a brief recap: the current tax exemption (which is approximately $13 million per taxpayer) is scheduled to drop to $7 million at the end of next year, pending no future regulatory changes.

You read that correctly: the exemption will be cut in half, undoubtedly having a major estate and gift planning impact on high-net-worth individuals and families with sizeable estates.

With more than a year out from the 2026 drop date, you may think you have more than enough time to take advantage of the provisions, but the truth is that the clock is already ticking. The sunset will have a massive impact on the legal, accounting, and financial planning sector. Many industry experts and thought leaders have agreed that taxpayers who wait until even the third or fourth quarter of 2025 will be hard-pressed to find an available estate tax attorney to accommodate their planning needs.

So, what can you do now to get ahead? Here are a few key points to keep in mind:

First things first: who stands to benefit from the estate tax exemption?

To sufficiently answer this question, it’s important to start with context.

Estate and gift taxes are closely linked since they are governed by the same federal tax rate and typically share a common federal lifetime exemption amount. This lifetime exemption permits taxpayers to give gifts without incurring taxes — whether they gift while they are still alive or as an inheritance — provided that the total amount transferred throughout their lifetime does not surpass the specified federal limit.

Nevertheless, the lifetime exemption amount does not encompass every yearly financial gift. Taxpayers can fully utilize the annual exclusion amount before dipping into their allocated lifetime exemption amount. As we mentioned above, in 2024 the federal lifetime cap for most individuals is roughly $13 million while the cap for most married couples is approximately $27 million.

When the provision sunsets, taxpayers who pass away with an estate that is subject to federal estate tax and surpasses the exclusion amount when combined with prior gifts could face a federal estate tax rate of up to 40%. With that said, virtually any taxpayer with a total net worth surpassing $25–$30 million could benefit significantly from starting the estate and wealth transfer planning process now.

Know what estate planning strategies to consider

The right estate planning strategy is entirely dependent on your individual situation, which is why it is essential to partner with a highly experienced, credentialed tax advisor and an estate tax attorney.

Here are five of the most common strategies that can help you maximize the higher exemption amount while it’s still available:

1. Transfer assets now

Individuals planning to transfer more than $5 million in their lifetime or after death should consider making those transfers before 2026. The IRS confirmed on November 26, 2019, that gifts made before January 1, 2026, will not be subject to future taxes, ensuring they retain their nontaxable status under the current exemption.

2. Use your exemption to help your loved ones

Reduce your taxable estate without using up the lifetime gift tax exemption by paying directly for loved ones’ medical bills, tuition, or other necessary expenses. Payments made directly to providers are not subject to a limit.

3. Explore philanthropy and support charitable causes

The TCJA temporarily increased the adjusted gross income (AGI) limit for charitable cash contributions to public charities, allowing itemized deductions of up to 60% of AGI. This offers another effective method to decrease your taxable estate outside of the lifetime exemption. A tax advisor can help you explore vehicles to facilitate your philanthropic efforts, such as establishing charitable lead trusts or transferring qualified charitable distributions (QCDs).

4. Take advantage of a Roth IRA conversion

Leverage current income tax rates before potential increases by converting traditional IRA funds to a Roth IRA. This strategy reduces your estate and allows tax-free withdrawals in the future, benefiting heirs with minimal tax consequences. Roth IRAs do not require lifetime minimum distributions and bypass probate.

5. Explore trust options

Trusts bypass the probate process, saving time and costs for heirs. Grantor trusts, in particular, offer additional advantages as the grantor retains some control over assets and reports trust income on personal tax returns, avoiding higher trust tax rates for income and capital gains. Grantor trusts can facilitate tax-efficient wealth transfer, essentially providing tax-free gifts. Some of the most popular trust types include:

• Spousal lifetime access trust (SLAT): This trust removes property and future appreciation from an estate while still indirectly benefiting the donor spouse.
• Dynasty trust: This trust transfers wealth across generations without transfer taxes affecting the assets.
• Irrevocable life insurance trust (ILIT): This type of trust removes life insurance policy death benefits from the gross estate, providing tax advantages.

Under the guidance of a tax advisor and estate tax attorney, you can tailor these strategies to your individual circumstances to maximize available benefits and minimize tax liabilities.

Don’t wait — your plan will have lasting effects

Ready to kick-start the estate planning process and leverage the TCJA provisions before it’s too late? Schedule a complimentary consultation with Aprio.

Related Resources

Record-High Exemptions for Tax-Free Gifting Set to Expire Soon

Act Now, Save Later with Estate & Gift Tax Exemption

Aprio’s Income & Estate Tax Planning Services