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How to Prepare for Sunsetting Estate Tax Exemptions Before 2026

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How to Prepare for Sunsetting Estate Tax Exemptions Before 2026

How to Prepare for Sunsetting Estate Tax Exemptions Before 2026 - Austin Estate Planning Attorneys

In Less Than 19 Months, Estate Tax Exemptions Will Likely Change. Are You Ready?

Millions in estate tax exemptions could vanish forever on Jan. 1, 2026. With that, you could lose potential opportunities to mitigate certain estate tax obligations. You may also be unknowingly subjected to higher estate tax rates if you haven’t put the right plans in place before these changes occur. 

To avoid these consequences, here are:

This 3-minute guide shares some simple, yet powerful, strategies for getting your estate ready for major tax law changes coming soon while there’s still time to put judicious plans in place. 

Whenever you’re ready for more information or personalized counsel and solutions, simply contact TAW Law Texas

6 Steps to Take Before Estate Tax Exemptions Sunset in 2026 

If there’s ever a time for estate taxes and your estate plan to be at the top of your priority list, it’s now. That’s because, every day we move closer to 2026 is 24 hours less to complete the following steps. As that window closes and 2025 starts to wind down, some steps may be more challenging to complete. Others may no longer be feasible.

To give yourself the most flexibility and options possible, start early — and try to make the last step (#6 below) a habit.

1. Know what’s at stake. 

If you are not fully aware of what’s happening with estate tax exemptions or what’s on the line, you may not fully recognize how inaction could cost you, your estate, and your beneficiaries until it’s too late. By knowing the facts about sunsetting estate tax exemptions, you can get some clarity on:

  • Key priorities 
  • Your potential vulnerabilities 
  • How everything fits and works together in light of your objectives

With that in mind, here are a handful of quick facts about the estate tax exemptions sunsetting in 2026: 

  • In 2024, the estate tax exemption is $13.61 million per individual and $27.22 million for a married couple.
  • The estimated estate tax exemptions in 2025 are roughly $15 million for individuals and $30 million for married couples.
  • The above estate tax exemptions were established by provisions in the 2017 Tax Cuts and Jobs Act (TCJA).
  • In 2026, those TCJA provisions will lapse.
  • If no new laws are passed before 2026, the estate tax exemptions for that year will revert to their pre-TCJA levels, adjusted for inflation. That’s roughly $7 million for an individual and $14 million for a married couple.
  • Comparing the expected 2026 exemptions to current levels shows that estate tax exemptions will likely be cut in half (give or take) by 2026.

For a deeper walk-through of what’s on the horizon, see our Estate Tax Exemption Guide and our rundown of the possible consequences of doing nothing before 2026.

2. Evaluate your estate.

How much is your estate worth, roughly speaking? The better idea you have of this number, the better positioned you may be to find ideal solutions for leveraging the existing estate tax and gift exclusions. 

In fact, if you know what your estate is worth, you can figure out: 

  • Whether you need to take additional action before 2026: Estates valued at less than $7 million will likely be unaffected by changing estate tax exemptions. On the other hand, estates worth more than $7 million may be thrown into some chaos by declining exclusions, especially in the absence of a will and/or other estate planning devices. Keep in mind that the value of your estate in 2024 or 2025 may not be the same as it is in 2026. So, think ahead and avoid anchoring the value to years past.
  • What strategies may be better suited for your goals: With the scope and value of your estate clear, you can realistically earmark enough for your current needs, your future plans, and your beneficiaries after you pass. As this “structure” comes together, it can be easier to identify which estate planning tools and devices may be more effective at covering all of your bases. 

3. Identify your assets and potential liabilities. 

Several assets and liabilities can be addressed and managed in distinct ways through various estate planning devices, particularly trusts. Putting these in place ahead of 2026 — and properly funding them — could give you better options for asset protection and estate tax mitigation before the exemptions sunset.

So, take into account:

  • Different asset types: Cash, business interests, real estate, life insurance policies, family heirlooms, and other assets can all be used to fund trusts, but there may be some trusts better suited for specific types of assets and objectives.
  • Diverse liabilities: Trusts may provide insulation from estate taxes, as well as other potential liabilities, like future creditors, divorce, and even lawsuits. Trusts may also serve as an effective buffer against evolving tax laws. 
  • How both assets and liabilities could evolve by 2026: Is your estate comprised of appreciating assets? Do you anticipate any new liabilities or possible losses ahead of 2026? Even if you answer “no” to those questions now, that could change before 2026. Either way, accounting for possible shifts in your assets and liabilities in the coming years can help you make more sound plans for them now. 

Depending on the composition of your estate and your designated beneficiaries, you may want to set up one or more trusts ahead of Jan. 1, 2026. Those trusts could include (and may not be limited to): 

  • Revocable living trusts: These devices are generally used to bypass probate and directly pass certain assets on to beneficiaries, according to the rules and/or restrictions put in place by the grantor (the trustmaker).
  • Real estate privacy trusts: REPTs are designed for real estate, houses, commercial properties, agricultural land, undeveloped land, and more, removing the need for probate while masking ownership for added privacy in various public records and online searches.
  • Spousal lifetime access trusts: As irrevocable trusts, SLATs let one spouse give the other spouse certain assets outside of probate, providing another way to maximize current estate tax exemptions before they expire.
  • Grantor-retained annuity trusts: GRATs can be an ideal option for appreciating assets, allowing grantors to collect annuity payments from the trust while reserving the appreciation for beneficiaries outside of probate. 
  • Irrevocable life insurance trusts: ILITs are typically for life insurance policies and benefits, holding these assets outside of an estate to keep them out of probate. Consequently, ILITs can carve out another way to protect a specific asset type without drawing on your individual or spousal estate tax exemption.
  • Intentionally defective grantor trusts: IDGTs can freeze the value of income-generating assets, like stocks, bonds, business interests, and royalties, so they can grow in a tax-free environment outside of the purview of estate taxes.
  • Other trusts: Family Limited Partnerships, Dynasty Trusts, Charitable Remainder Trusts, Special Needs Trusts, and/or other devices can support a comprehensive estate plan. They may also have the potential to do more for you ahead of 2026 while higher estate tax exemptions still apply.

4. Consider gifting. 

Lifetime gifting ahead of 2026 can be another effective way to mitigate future estate tax liabilities. With this strategy:

  • You can give up to $18,000 in 2024: That means giving up to $18k per individual, with the option of giving to as many people as you’d like without paying taxes on those gifts.  
  • The limit goes up to roughly $19,000 in 2025: After gifting in 2024, you can take advantage of this strategy again next year, leveraging the new limit, estimated to be about $19k in 2025.
  • Married couples can leverage “gift splitting”: With this, each spouse can invoke their gift to effectively double it. So, for example, in 2024, a husband and a wife could each give their child $18,000 for a total gift of $36,000 without invoking tax liabilities.

Notably, if you put this strategy in play, your gifts can be:

  • Direct: Giving “presents” that consist of cash or specific assets, like vehicles, jewelry, or personal property, can constitute direct gifts.
  • Indirect: These gifts tend to involve paying for something on behalf of a recipient, like covering tuition expenses, medical bills, credit card bills, or other expenses. With indirect gifts, you may be able to give more.

5. Review and update your estate plan (if/as needed).

Revisiting your estate plan in light of changing estate tax exemptions can highlight any terms, devices, and/or documents you may want to revise. This step can also help you make finer adjustments to any existing trusts that you currently have in place, giving you a chance to: 

  • Update your beneficiaries: Growing families, divorce, and other shifts in your personal life can necessitate a fresh look at the beneficiaries for different trusts.
  • Swap out certain assets: Some trusts let you change out assets of equal value, which could be more advantageous before 2026, as opposed to afterward.
  • Add additional funding to your current trusts: Newer assets not held by a trust may be transferred into an existing trust before Dec. 31, 2025, possibly yielding more benefits and tax advantages in the process.
  • Set up new devices ahead of 2026: You may not be exercising every opportunity to leverage current estate tax exemptions or get ahead of the sunsetting exclusions — and you can’t be sure if you are without reviewing your estate plan. If your life, your major relationships, and/or your finances have changed since you crafted or last checked out your estate plan, you may want to create new trusts and/or a new version of your will while higher exemptions and more options are on the table. 

6. Stay in the know.

Anything could happen ahead of 2026 because there’s still time for new laws that may keep existing exemptions in place or alter them in some novel manner. Whatever happens before the looming 2026 “deadline” for exemptions changes, keeping an eye on this issue can keep you at the forefront of any shifts or game-changing new rules that could impact your estate plan or your objectives.

An effective way to put that monitoring on “autopilot” is to set up routine check-ins with an experienced estate planning lawyer. If you do, you can stay in the know about any impending estate tax changes, with personalized updates, advice, and action plans.

8 Essential Questions to Ask & Answer Before 2026

As helpful as the above steps can be, your best moves before 2026 are not going to look exactly like anyone else’s. That’s because your unique circumstances can influence and shape the steps you may need to take ahead of 2026 if you’re serious about making the most of the higher estate tax exemptions before they go away. 

To that end, asking yourself these questions and thinking about the answers can help you dial into your specific needs and what may be best for you:

  1. What are my estate planning goals?
  2. Who are my beneficiaries?
  3. What’s in my current estate plan?
  4. Am I going to start a new business or buy new real estate before 2026?
  5. What other assets do I expect to accumulate ahead of 2026?
  6. How much could the value of my estate plan change by 2026?
  7. What resources can I leverage to make better estate planning decisions before the exemptions sunset in 2026?
  8. What would happen to my estate and beneficiaries if I died tomorrow — would my estate plan be in order?

Remember, you don’t have to contemplate these questions alone. Talking through your answers, especially with an experienced estate planning attorney, can uncover deeper insights and better solutions.

How to Make the 2026 Estate Tax Exemption Changes Work for You

No matter where you’re at with estate planning or when you’re finding out about the sunsetting estate tax exemptions, consulting an experienced estate planning attorney can give you access to confidential answers and a personalized roadmap for success. To talk to some of the most trusted estate planning and probate lawyers in Austin, Texas, just contact TAW Law Texas.

Email us or call 512-827-9212 now.

Renowned for providing extraordinary counsel and custom solutions, our Austin attorneys are deeply experienced at representing clients in several estate planning, probate, and other legal matters throughout Travis County, Williamson County, Bastrop County, Blanco County, Hays County, and beyond. We are also dedicated to delivering exceptional value, which is why we are the first probate law firm in Austin, Texas, to provide premium probate services.

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Todd A. Wilson

Todd A. Wilson has been practicing law since 2007, with the aim of educating all strata of society and sharing crucial insights about the importance of estate planning, probate, and more.

The Law Office of Todd A. Wilson (also known as TAW Law TX) offers affordable estate planning and probate services.