An Opportunity for a Timely Wealth Transfer

In 2017, Congress passed the Tax Cuts and Jobs Act, increasing the amount of money you can transfer from your estate during your lifetime or at death without incurring the standard 40% gift and estate tax. This amount, called the lifetime gift & estate tax exemption, is $13.61 million per person, or $27.22 million per married couple, in 2024.

However, that exemption amount is scheduled to fall to less than half on January 1, 2026. As a result, a single individual could end up paying more than $3 million in additional estate tax, and a married couple could pay more than $6 million extra. When it comes to this opportunity, our planning varies across three scenarios:

If you fall into this category, you fall in line with 99% of American households. Even if the exemption amount does fall to around $14 million, you should have little concern over the federal estate tax. However, while estate tax planning may not be important, estate planning is still vital for securing a strong financial future. Your Baird Financial Advisor can help review your existing estate plan to ensure it still meets your family’s needs.

If your net worth falls somewhere between these amounts, you have the most to discuss with your Baird Financial Advisor. While today you have no estate tax issues, you could be facing a multi-million-dollar tax cost if the sunset does occur. Talk with your Baird Financial Advisor to discuss what planning strategies make most sense for you.

If your net worth falls into this category, it is unlikely the lifetime exemption will ever be large enough to eliminate your need for estate tax planning. Because of this, you should already be in contact with your estate attorney, Baird Financial Advisor and other advisors to ensure your estate plan is up to date with current tax laws.

Is there any chance the exemption could change?

While there is a possibility that the provision could be extended or modified by Congress, there’s no guarantee that it will. Tax laws are never permanent, and with an upcoming presidential election, it’s impossible to predict where this might land. It’s important to talk with your Baird Financial Advisor to explore what strategies are available, even if you ultimately decide not to take advantage of this increased exemption.

How your Baird Financial Advisor can help

Your advisor has access to resources and specialists like our advanced wealth, tax and estate planning teams, along with our trust strategists and Business Owner Solutions group – making them well-equipped to discuss and analyze any options available to you. And by working with your other tax and legal advisors, they can help develop a plan that is best tailored to your overall situation. Whether you are facing potential estate tax liability now or think you might in the future, or if you just need to review your existing plan to ensure it still meets your family’s needs, please know your Baird Financial Advisor and a team of planning specialists are ready to help.

If you’re interested in learning more about legacy planning, including tax implications, family dynamics and charitable giving, consider watching our recent webinar, “Passing the Torch: Thoughtful Strategies for Wealth Succession."