Looking to the Future – Tax Planning for the Sunset

The 2017 Tax Cuts and Jobs Act (TCJA) nearly doubled the lifetime estate and gift tax exemption from $5.6 million to $11.18 million for individuals, indexed for inflation after 2018. For 2023, the indexed exemption rose to $12.92 million ($25.84 million for married couples).¹

This higher exemption amount is set to “sunset,” or expire, on January 1, 2026, with the exemption amount dropping down to the amount it was in 2017. Barring congressional action, the inflation-adjusted exemption is expected to return to approximately $7 million ($14 million for married couples) in 2026, effectively reducing the exemption amount by half. 

How to Adapt to the Changing Tax Landscape

Both term and permanent life insurance policies provide a death benefit, which is generally paid to the beneficiary free of federal income tax and offers a tax-efficient way to make sure your family has the resources to help with the following:

• Covering final expenses such as taxes, mortgages, or other debts
• Maintaining their standard of living
• Carrying out education plans for your children

Consulting with an estate planning attorney allows you to utilize the tools available to transfer your assets more tax-efficiently. There are a variety of tools that may be used to minimize the impact of these tax changes on you, your family, and your business. Contact your Federated^® marketing representative to set up a meeting with our independent network of attorneys specialized in estate planning.
 

^{1 IRS Estate & Gift Tax FAQs. https://www.irs.gov/newsroom/estate-and-gift-tax-faqs. Accessed 11/1/2023.}

This content may be accessed in the following additional options:

• November 2023 IYL Planning For the Sunset - PDF
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This article is for general information and risk prevention only and should not be considered another other offer of insurance or legal, financial, tax, or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all losses. The information herein may be subject to, and is not a substitute for, any laws or regulations that may apply. This information is current as of its publication date and is subject to change. Some of the services referenced herein are provided by third parties wholly independent of Federated. Federated provides access to these services with the understanding that neither Federated nor its employees provide legal or other expert advice. All products and services not available in all states. Qualified counsel should be sought with questions specific to your circumstances. All rights reserved.