Take Advantage of the Estate Exemption Now … Before It’s Gone

As we head into election season, AMG clients should be aware that unless Congress extends the 2017 Tax Cuts and Jobs Act before it expires at the end of 2025, the per-person estate and gift tax exemption of $13.6 million will revert to about $7 million.

There are strategies to take advantage of the higher exemption before it ends, but you should act now. If you have a taxable estate, you should consider:

Irrevocable Life Insurance Trust – This instrument is used to own life insurance policies. Typically, insurance proceeds payable at death will not be included in the decedent’s probate estate, nor will they be subject to taxes if the policy has been transferred to the trust for at least three years prior to the insured’s death. Life insurance purchased by the trust after the three years is not included in the estate.

Lifetime gifting – In 2024, the annual gift tax exclusion is $18,000. There is no limit to the number of annual exclusion gifts that a donor can make. A married couple can collectively give $36,000 to each donee in 2024 without utilizing any of their lifetime exemption or paying gift taxes.

Spousal Lifetime Access Trust (SLAT) – The high lifetime gift-tax exemption is responsible for the resurgence of the SLAT as an effective estate-planning technique. It is like the credit-shelter trust in that it seeks to shelter assets for the spouse and family members. While a credit-shelter trust is not funded until the grantor’s death, the SLAT is funded when the grantor is alive. One advantage of doing so is to fully or mostly utilize the current year lifetime gift and estate tax exemption and to get future appreciation of the assets in the trust out of the taxpayer’s estate.