Estate planning attorneys are warning clients about changes in tax laws as the sunset of the Tax Cuts and Jobs Act approaches on Jan. 1, 2026. This deadline will make it more challenging to address tax and estate planning issues before the changes take effect. The TCJA, implemented in 2017, overhauled the Internal Revenue Code and raised the estate, gift, and generation-skipping transfer tax exemption amounts to $13.61 million per U.S. citizen, the highest in history. However, these exemptions will sunset in 2026 and revert to lower levels, potentially cutting them in half.
Clients are currently in a golden age for estate planners and tax practitioners, with the ability to shelter significant amounts of wealth from taxes. It is important for clients to use their exemptions before the 2026 deadline by gifting to irrevocable trusts and utilizing advanced estate planning strategies. Estate planning attorneys are urging clients to seize this opportunity before it is too late, as the chances of such high exemption amounts may not come around again in their lifetimes.
There are parallels between the current situation and the expiration of President George W. Bush’s tax cuts in 2008. At that time, doomsday predictions by estate planning attorneys did not come to pass, as legislative changes delayed the impact of the tax cuts. However, the current landscape suggests that making the TCJA provisions permanent will be more challenging. With a growing federal debt of over $34 trillion and limited options for raising additional revenue, it is uncertain if Congress will extend the TCJA.
Clients are advised to heed the concerns of estate planning attorneys and act before the 2026 deadline. The demand for estate planning services has surged due to the aging U.S. population, while the supply of qualified attorneys has not kept pace. Many complex estate planning transactions require a team approach involving a financial advisor, CPA, and appraiser. Time is of the essence to utilize the current exemption amounts and ensure that all professionals are aligned in advancing the estate planning transaction.
As the deadline looms, estate planning attorneys and private wealth planning professionals are working diligently to complete advanced transactions before the TCJA sunset. The limited availability of qualified professionals and the complexities of the transactions make it essential for clients to act promptly. By working with their attorneys and taking advantage of the current tax laws, clients can ensure that their assets are protected and their legacies preserved in a tax-efficient manner before the changes take effect in 2026.
