In this 3-part series, we explain how the planned expiration of the Tax Cuts and Jobs Act (TCJA) at the end of 2025 could potentially impact your estate planning. We’re here to help you prepare accordingly.
In part 1 we provided an overview of the anticipated tax policy changes and reviewed the legislative backdrop setting the stage for these changes. Navigating this evolving landscape requires trusted advice, proactive planning, and strategic foresight. Here, in Part 2, we outline how the tax expirations will impact your estate planning and offer guidance about how to proceed.
The end of 2025 is not as far off as it may seem. To get a head start and learn about estate planning and income tax planning strategies to help potentially reduce your tax liabilities, read our TCJA Tax Expiration White Paper where insights from all three articles in our series are compiled in one document.
What changes will occur: a recap
The Tax Cuts and Jobs Act (TCJA) of 2017 ushered in significant reforms, aiming to simplify the tax code, incentivize investment, and stimulate economic growth through various provisions that affected individuals, businesses, and the economy at large.
Certain provisions of the TCJA are set to expire or change including individual tax rate reductions, estate tax exemptions, and the treatment of pass-through income. These potential changes could significantly impact tax liabilities, retirement planning strategies, and estate planning considerations.
One significant change was the TCJA effectively doubling the estate and gift tax exemption amount. This resulted in fewer estates subject to federal estate taxes. However, this tax provision is set to end at the end of 2025. As a result, estates previously subject to the exemption may face a federal tax of up to 40% if estate planning strategies are not deployed prior to expiration:
The forthcoming expirations of other key provisions within the TCJA may have significant implications on various segments of taxpayers across the United States. Understanding these implications is essential for navigating the evolving tax landscape effectively and optimizing financial outcomes in the years ahead.
For additional details on more of the provisions that are expected to change at the end of 2025, read part 1 of our series.
Strategies to help minimize estate tax
The TCJA effectively doubled the estate and gift tax exemption amount, resulting in fewer estates subject to federal estate taxes. However, with a sunset of the tax provision set for the end of 2025, estates previously subject to the exemption may face a federal tax of up to 40% if estate planning strategies are not deployed prior to expiration.
Here are strategies to consider.
- Make an outright gift, to someone other than your spouse, and have your lifetime exclusion amount apply toward any gift amount above the annual exclusion ($18,000 for 2024). If making an outright gift to a skip person (a grandchild, for instance), you can also apply a generation-skipping transfer (GST) exemption to those gifts.
- Utilize one spouse’s lifetime exemption by gifting assets while preserving the other spouse’s exemption. This ensures that even after the anticipated reduction in the exemption, one spouse’s exemption will still be accessible. As a result, a married couple can currently transfer as much as $13.61 million while retaining the availability of one spouse’s lifetime exemption for use after 2026.
- Transfer assets into a Spousal Lifetime Asset Trust (SLAT), which effectively removes the assets from your estate. If both spouses wish to create SLATs, the terms of each trust need to be substantially different to avoid the “reciprocal trust doctrine.”
- Use a Grantor Retained Annuity Trust (GRAT) to transfer assets and future appreciation into a trust that provides an annuity income for a designated duration of years. Once the terms of the trust ends, the assets remaining are distributed to remainder beneficiary.
- An Intentionally Defective Grantor Trust (IDGT) utilizes the current lifetime exemption while removing assets from the grantor’s estate but is structured so that the grantor continues to pay income taxes on the assets, allowing the trust to appreciate outside of the grantor’s estate.
- Charitable Giving contributions can be part of your estate tax strategy. Donating appreciated assets to charity can help you avoid capital gains taxes and receive a tax deduction. Charitable giving strategies can include donor advised finds, charitable gift annuities, charitable remainder trusts or private foundations.
- Funding an irrevocable Life Insurance Trust (ILIT) can provide death benefits that are income and estate tax free. You can use a portion of your gift tax exemption by gifting cash to the ILIT, which is used to purchase a new policy, or you can gift an existing policy into the ILIT.
Let’s take the example of Ms. Roberts, a successful entrepreneur with a $15 million estate. Here’s how the TCJA expiration might impact her estate planning. 
If Ms. Roberts, does not take advantage of the higher TCJA exemption before it sunsets, her heirs could face a significantly higher estate tax liability--nearly six times more-- and receive an estate that values for $2.58 million less.
Ready to learn more? Read our Tax Expiration White Paper.
How Hancock Whitney Wealth Management Can Help
The end of 2025 is not as far off as it may seem. Waiting until these tax changes occur could limit available planning opportunities and lead to missed savings or increased tax liabilities.
An effective estate plan should include flexibility to maximize the benefits of current tax laws and estate exemptions while recognizing the unknowns of future tax laws.
Hancock Whitney is here to help evaluate your current situation, and help you visualize the benefits of proactive planning. We have provided trust and fiduciary services since 1935 and will collaborate closely with you and other trusted professionals to develop tailored strategies that optimize tax efficiency while aligning with long-term financial goals.
Our team is ready to help you achieve your financial goals. Contact your advisor today.
Please consult your tax professional.
The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.
This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
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