Will $15 Million Become the Permanent Estate Tax Exemption?

The federal estate tax is a tax on the transfer of a deceased person's assets to their heirs. However, a significant exemption exists, meaning that only estates exceeding a certain value are subject to this tax. For the year 2025, the federal estate tax exemption is $13.99 million per individual. This effectively means that an individual can pass on up to $13.99 million in assets without their estate incurring federal estate taxes. For married couples, this exemption is doubled to $27.98 million.

Recently, there has been discussion and a proposal in the House of Representatives regarding making a potentially permanent increase to this exemption. A proposed bill suggests raising the estate tax exemption to $15 million for single filers and $30 million for married couples, starting in 2026, and making this increased exemption permanent. This proposal is part of a broader tax bill that aims to extend various provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, which is currently set to expire at the end of 2025. If no action is taken by Congress, the estate tax exemption is scheduled to revert to its pre-TCJA level in 2026, estimated to be around $7 million per individual, adjusted for inflation.

The potential permanent increase to $15 million (and $30 million for couples) would have significant implications for estate planning. It would mean that fewer estates would be subject to federal estate taxes, providing more wealth transfer to heirs without taxation. However, the passage of this bill is not guaranteed. It faces potential challenges in the Senate, including procedural hurdles and debates over the bill's broader fiscal impact and distributional effects. Estate planners are currently advising clients to consider strategies to take advantage of the current higher exemption levels before the potential sunset at the end of 2025, while also monitoring legislative developments for future planning.

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Disclaimer: This blogpost provides general information about estate and financial planning and is not intended as legal or financial advice. It’s essential to consult with a qualified estate planning attorney and financial advisor to discuss your specific needs and create a plan that’s right for you.