Be Prepared for 2025 Increase in Estate Taxes

Federal law provides an estate tax lifetime exemption that allows an individual to pass on his or her properties to beneficiaries without paying taxes on the transfer. Anything you pass on to others that’s valued at more than the exemption amount can be taxed at a rate of as much as 40% in 2024 and after.

The value of all properties that you own at the time of death is subject to estate taxes, including:

• Your real estate properties

• Your financial accounts, such as checking, savings, money market, and certificates of deposit accounts

• Proceeds from your life insurance policy

• Roth and IRA accounts at 100% of their value

• Personal belongings, such as jewelry and vehicles

• Business interest

In 2024 and 2025, the federal exemption amount will be about $13.6 million per person. This means that individuals can transfer up to $13.61 million tax-free during their lives or at death, and married couples can transfer up to $27.22 million. These amounts will be cut in half by the end of 2025.

In 2026 and after, the exemption is expected to be cut in half and estimated to be around $6.8 million per person. This change could affect the estates of many taxpayers who saw the value of their real estate properties increasing significantly over the past few years. Further, given the current and projected rates of inflation, many estates will suddenly find themselves subject to estate taxation.

To take advantage of the current low estate taxes, act now and schedule your appointment to discuss your estate and gift tax planning strategies.