Several provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), enacted on Jan. 1, 2018, are set to sunset at the end of 2025, as we’ve discussed before. The results of the 2024 election, however, have given estate planners reason to believe that some portion or all of the provisions scheduled to sunset may be extended beyond 2025, or even made permanent – but that will depend upon Congress taking action by the end of the year.

With the fate of the sunsetting tax provisions in the TCJA up in the air for now, it is important for you and your advisors to monitor any developments while at the same time looking at your own situation to assess what is best for your estate plan and wealth transfer goals. As we’ve mentioned before, preparation and planning are paramount. Let’s look a little more closely at some key provisions set to expire and some actions you could take to get out ahead of the potential changes.

Federal Estate and Gift Tax Exemption

Pending action from Congress, the federal estate and gift tax exemption amount will decrease, effective Jan. 1, 2026, from $13.99 million per person ($27.98 million for a married couple) to the pre-TCJA amount of $5 million, adjusted for inflation (projected to be somewhere in the range of $7 million to $7.5 million per person, or $14 million to $15 million per married couple). What this means is, absent action by Congress, a married couple can protect over $13 million more from estate taxes in 2025 than they will be able to on and after Jan. 1, 2026.

For those with assets in excess of the current federal exemption amount, using the entirety of the federal exemption before the Dec. 31, 2025 sunset could lower future estate and gift tax bills significantly. Some strategies to consider include: 

• Transferring income-producing assets to family members who might be in lower tax brackets. 
   
• Utilizing one spouse’s lifetime exemption. With this approach, one spouse uses their complete lifetime exemption by gifting assets while preserving the other spouse’s exemption. This ensures that even after the scheduled reduction of the exemption amount under the current law, one spouse’s exemption will still be accessible come 2026 and beyond. 
   
• Creating a Grantor Retained Annuity Trust (GRAT). GRATs are irrevocable trusts that serve the purpose of transferring assets away from the estate of the individual establishing the trust (the grantor), while guaranteeing a steady stream of income to the grantor. In such instances, the grantor, having moved assets into the trust, becomes eligible to receive a series of annuity payments for a designated number of years. Once the term of the trust ends, the assets remaining are distributed to the remainder beneficiaries (usually the grantor’s children or grandchildren). 
   
• Creating a Spousal Lifetime Access Trust (SLAT). A SLAT can help married couples take advantage of the current gift tax exclusion while also receiving income distributions for the marital household. This strategy involves the transfer of assets by one spouse into an irrevocable trust for the benefit of the other spouse, effectively eliminating these assets from the grantor spouse’s estate, and thereby excluding them from estate taxes. At the same time, the grantor spouse receives an indirect benefit in the trust’s assets by way of the spouse’s ability to access income and principal distributions.
   

Individual Income Tax Rates

Individual income tax rates also would be affected by the sunset. Marginal tax rates for individuals will revert back to pre-TCJA levels in 2026, with the top tax bracket going from 37% to 39.6%. A couple strategies to consider here include: 

• Completing Roth conversions: With the tax brackets potentially increasing, it might be to your advantage to convert a portion of traditional retirement savings into a Roth account. This can give you more options for tax strategies in retirement, as individuals holding a blend of pre-tax and Roth savings could gain improved control over their future tax obligations. For instance, if you’re initially in a lower tax bracket when you retire, it might be prudent to withdraw from pre-tax sources first (as you would pay taxes on the distributions) and later, when facing higher tax brackets, tap into Roth sources (where you would not pay taxes on the distributions). 
   
• Utilizing capital gains tax rates: Long-term capital gains tax rates are typically lower than ordinary income tax rates. If you have investments with significant gains, you may want to consider realizing some of those gains now before overall individual tax rates increase.
   

The time is now to start planning for the possible sunset of the tax provisions in the TCJA. Waiting until the end of 2025 or until Congress takes action could cause you to rush your planning, or result in attorneys or other advisors being unavailable to help you. Contact us today to start the conversation.

This article was published in the Q2 2025 issue of the Bell Wealth newsletter.