Are you ready for the Estate Tax Exemption to Sunset in 2025?

The Estate Tax Exemption is a tax imposed by the federal government when property and assets are transferred to your heirs and beneficiaries at your death. Currently, the federal estate tax exempts up to $13.61 million of your estate, meaning your heirs or beneficiaries will not have to pay tax on an asset or property up to that amount. Only values over this threshold is subject to estate tax.

However, at midnight on December 31, 2025, the estate tax exemption “sunsets” or expires and a new amount will be imposed. This amount is unknown but is estimated to drop to $5-$6 million.

In order to minimize potential tax liabilities, careful planning needs to happen:

1. Review your current Estate Plan. Ensure your estate plan is up-to-date and aligned with your current wishes and financial situation. If you don’t have an Estate Plan or a Living Trust, now is the time to create one.
2. Maximize Use of the Current Exemption. Start making gifts or transfers of assets now before the sunset date of December 31, 2025. This will help reduce the size of your taxable estate.
3. Consider Lifetime Distribution Gifts. Make use of the annual gift tax exclusion to gift assets to family members during your lifetime. The Annual gift tax exclusion is $18,000 per person per year.
4. Have a Business Succession Plan. If you own a business, review your succession plan to ensure a smooth transition of ownership. This may involve structuring ownership transfers or buy-sell agreements.
5. Stay Informed. Keep up with legislative changes to the estate tax laws between now and the end of 2025. Our country will be voting in a potential new president and members of Congress in November.
6. Make An Appointment. Consult with your tax advisor and financial advisor for advice.
7. Make an Estate Plan. Soto Law Group can help you create a plan that will protect your assets, minimize tax liabilities, and preserve your wishes as well as your legacy.

For more information, please contact Soto Law Group at 949-945-0059 or email us at info@thesotoloawgroup.com.

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