CPA financial planners need to talk with high-net-worth clients now about the idea of shifting ownership of millions of dollars in assets before the estate and gift tax basic exclusion is essentially cut in half on Jan. 1, 2026, Bob Keebler, CPA/PFS, said in an AICPA Personal Financial Planning (PFP) Section webcast.

"We are in a true use-it-or-lose-it situation" because of the upcoming expiration of the temporarily doubled exclusion, and it is important to communicate with clients now, he explained in his webcast "Planning With SLATs and SLANTs Ahead of the TCJA Sunset") earlier this year.

Although some clients may be hoping Congress will step in and extend the doubled exclusion, Keebler thinks the odds of lawmakers reaching a compromise on this issue are slim. Any deal in Congress likely would not be reached until the end of 2025, he suggested.

"What that means is, we can’t simply sit by and wait to see what happens, because your clients will not know if a compromise occurs until it’s too late to prepare psychologically" to transfer a major portion of their assets. Nor will they have time to retain a top-quality lawyer to help them set up trusts to receive the assets before attorneys are swamped with similar work from other clients, Keebler said in his webcast.

Some clients will choose to hold off on transferring assets until the fall of 2025 to see whether legislation is enacted to extend the increased exclusion. But being prepared means "we have to get our trust set up," Keebler said.

The exclusion was essentially doubled by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, and currently stands at $13,610,000 ($27,220,000 for married couples). On Jan. 1, 2026, the exclusion will revert to approximately $7 million ($14 million for couples).

Taxpayers who die with a taxable estate that, combined with certain past gifts, exceeds the amount of the exclusion may be required to pay federal estate tax at a rate as high as 40%.

Clients can save up to $5 million to $6 million of estate tax by using the doubled exclusion before it expires, Keebler noted. "For many clients, it’s basically $14 million times 40%." Crucially, there is no clawback when individuals transfer assets before the sunset and die after the sunset, he noted.

SEE: https://www.journalofaccountancy.com/news/2024/may/prepare-large-estate-for-tcja-sunset-now.html

Arthur H. Geffen

Attorney & Counselor at Law

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