3 Ways to Maximize Your U.S. Estate and Gift Limits Before They Get Cut in Half

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3 Ways to Maximize Your U.S. Estate and Gift Limits Before They Get Cut in Half

As we move through 2024, significant changes are on the horizon for U.S. trust and estate rules. Currently, each U.S. person enjoys an estate and gift tax exemption of $13.61 million. However, with the sunsetting of the Tax Cuts and Jobs Act (TCJA) at the end of 2025, this amount is projected to drop to approximately $7.14 million based on inflation rates. This shift could have substantial implications for high-net-worth individuals and their estate planning strategies.

While the changes are over a year away, now is the time to start planning. Taking advantage of the current higher exemptions can offer considerable tax savings and ensure that more of your wealth is preserved for future generations.

Proactive measures and thoughtful strategies are essential to ensure you maximize the benefits of the current estate and gift limits before these changes take effect


Here are three tips to help you get the most out of the current situation:

1.    Plan Ahead for a Smooth Transition

Many people won’t be ready to take action just yet. That doesn’t mean you shouldn’t plan, though. Proactive planning is more important than ever, with the gift and estate tax exemption set to decrease from $13.61 million to approximately $7.14 million at the end of 2025.

Even if you’re not ready to make substantial gifts immediately, taking the time to get your affairs in order is vital. Identify the assets you intend to move into a trust and consult with a trust tax expert. This proactive planning will ensure a smoother and faster execution of your trust when the time comes, especially because if President Biden wins a second term, he may change the limit sooner than the end of 2025.

By planning ahead, you can navigate the upcoming changes efficiently and protect your wealth for future generations. Effective estate planning now can help you manage the potential impacts of the American estate tax changes.

2.    Take Advantage of the $13.61 Million Exemption Now

Many people might hesitate to use their total exemption immediately, but acting before it sunsets can be highly beneficial. With the current $13.61 million estate tax exemption set to decrease at the end of 2025, it’s a prime opportunity to make the most of the higher limits.

Consider utilizing the full $13.61 million exemption before it decreases. You can lock in the higher exemption by gifting this full amount now. Even though the threshold will decrease post-2025, using up the higher exemption now won’t have any negative repercussions later. This strategy allows you to transfer significant wealth without incurring additional estate taxes in the future.

Acting before the sunset ensures you can maximize your wealth transfer benefits, safeguard your assets, and reduce future tax burdens. Understanding the nuances of the U.S. inheritance tax and how it interplays with the U.S. estate tax is crucial for effective estate planning.

3. Optimize Spousal Gifting Strategies

It’s easy to overlook the nuances of spousal gifting, but optimizing this strategy can provide significant benefits. Each spouse currently has a $13.61 million estate and gift tax exemption, offering a unique opportunity for effective wealth transfer.

Suppose you’re planning to gift more than $7.14 million now. In that case, it’s advisable to use up the entire $13.61 million exemption from one spouse. This approach ensures that the second spouse retains their total $7.14 million exemption after the TCJA sunsets, optimizing your family’s estate tax strategy. By doing so, you maximize the use of available exemptions, preserving more wealth within your family.

Understanding and leveraging spousal exemptions efficiently can significantly enhance your estate planning, ensuring your family’s financial security for the future. Properly structured spousal gifts can help mitigate potential U.S. inheritance tax impacts.

Have Questions About Trusts and Estate Planning?

Navigating the complexities of trust and estate planning can be challenging, especially with significant changes on the horizon. 

Whether you need help understanding the current rules or planning for the future, we’re here to assist you.

Get in touch today to discuss your trust and estate needs.

To learn more, read about the most common mistakes U.S. citizens make when setting up trusts. 

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