The 2024 Election & Your Estate Plan: What You Need to Know

As we approach the 2024 election, many individuals are concerned about how potential changes in the political landscape could affect their estate plans. The upcoming election could have significant implications for gift and estate tax rates, which are set to revert to pre-2017 levels if no new legislation is passed. This blog post will help you understand the potential changes and how to prepare your estate plan accordingly.

The Current Estate Tax Landscape

The Tax Cuts and Jobs Act (TCJA) of 2017 brought substantial changes to the gift and estate tax exemption amounts, doubling them to historic highs. As of 2024, the lifetime gift and estate tax exemption is $13.61 million per individual, allowing a married couple to give away up to $27.22 million during their lifetimes or at death without incurring any gift or estate taxes. However, these elevated exemption amounts are scheduled to expire at the end of 2025, reverting to approximately $7.5 million per individual ($14.5 million for a married couple), depending on inflation adjustments.

What Could Happen After the 2024 Election?

The future of the TCJA and the current estate tax exemption levels will likely depend on the outcome of the 2024 election. Different political outcomes could lead to varying tax policies. For instance, one party may support extending the TCJA provisions, while another may push for a rollback to pre-2017 levels or even propose additional tax increases.

Given these uncertainties, it’s crucial to stay informed and be prepared to adjust your estate plan as needed. The potential for changes underscores the importance of flexibility in your planning strategy.

Planning Strategies in Times of Uncertainty

Without knowing exactly what the future holds, it’s essential to consider strategies that offer flexibility and align with your long-term financial and legacy goals. Here are a few planning strategies that could be beneficial:

1. Annual Gifting:
In 2024, the annual gift tax exclusion allows you to give up to $18,000 per person without incurring any gift tax liability. This can be an effective way to reduce the size of your taxable estate over time.

2. Lifetime Gifting:
Given the current high exemption amounts, you may want to consider making larger gifts before the potential sunset of the TCJA in 2026. The IRS has clarified that gifts made under the current exemption levels will not be “clawed back” if the exemption decreases in the future.

3. Irrevocable Trusts:
For higher-net-worth individuals, establishing an irrevocable trust can help shift assets out of your taxable estate, potentially reducing your estate tax liability. Funding a trust before the end of 2025 could allow you to maximize the current exemption.

4. Life Insurance:
Life insurance can be a valuable tool in estate planning, particularly if the estate tax exemption decreases. An irrevocable life insurance trust (ILIT) can ensure that death benefits are excluded from your taxable estate, providing liquidity to cover any potential estate taxes.

Take Action Now

Given the complexities and uncertainties surrounding the future of estate tax laws, it’s wise to consult with an attorney or financial professional to review and potentially update your estate plan. Waiting until the last minute could limit your options and make it difficult to implement effective strategies in time.

No matter the outcome of the 2024 election, the key to a successful estate plan is to tailor it to your specific goals and needs while allowing for flexibility in an ever-changing legal and tax environment. Preparing now can help you navigate potential challenges and seize opportunities that may arise in the future.