The importance of the Tax Cuts and Jobs Act (TCJA) in 2017 to wealth transfer and estate plans can’t be overemphasized. The changes to the federal tax code reformed and significantly lowered personal and business tax rates, plus more than doubled the maximum amount that can be transferred to beneficiaries without incurring federal gift or estate taxes. Indexed for inflation, the lifetime exemption in 2025 is $13.99 million for individuals and $27.98 million for couples.
The TCJA is set to expire, or “sunset,” on December 31, 2025, likely lowering the exemption limit to approximately $7 million per individual and $14 million per couple beginning in 2026. Estates are taxed at 40% for every dollar over exemption limits. Our team of Private Client Advisory (PCA) professionals can help you and your family plan for the significant impact these lower limits could have on your estate.
Our Approach
Strategic wealth transfer plans should be structured to achieve several objectives: fulfill personal wishes, provision to care for your family and loved ones, incorporate business succession, and maximize tax efficiency. These plans require time for your team of advisors to draft and execute the right documentation and leverage tools — like gifting shares, creating trusts, purchasing life insurance and setting up charitable giving, for instance — to meet your unique short- and long-term needs. Thoughtful consideration is key since some strategies are irrevocable once put in place.
We often find that clients with estates under current exemption amounts don’t feel a sense of urgency to start planning now. Although future tax law changes can’t be predicted, we can project future asset growth and business valuation, shedding light on potential estate value a decade or more in the future. Now is the time to have high-level conversations about your wishes for asset distribution and ensure documents like trusts, wills, and powers of attorney are up to date.
Addressing a business succession plan in a parallel path with your personal estate plan brings benefits, too. It can achieve two important objectives: avoiding unintentionally falling under your state’s probate laws or being forced to sell the business at a low “fire-sale” valuation to settle an estate. Business owners should also be careful not to “let the tax tail wag the dog.” Stakeholder alignment is an approach that not only considers tax strategies but also overall business succession planning and beneficiary wants and needs.
For instance, gifting shares now to decrease the value of the business in an owner’s estate is one tax-advantage strategy. However, your children may not want to be involved in the business or are pursuing a different career path. We can facilitate conversations with your beneficiaries to understand their interests and intentions and help you preserve your legacy. Read more of our smart estate planning moves for business owners >
One Strategy Doesn’t Fit All
That’s why we invite you to contact us today to talk about your estate plan, particularly with the anticipated sunset of the TCJA. We look forward to collaborating with your entire team of experts to create a comprehensive plan that journeys with you throughout every stage in life. Contact Tom Wiggins, CFP®, CPFA, CTFA, M.S.M, at 313.202.7400 or [email protected]; or Gerald Wernette, CPA, CEBS, AIFA®, C(K)P®, CEPA, at 248.952.5000 or [email protected] for a personal conversation.
Securities offered through Rehmann Financial Network, LLC, member FINRA/SIPC. Investment advisory services offered through Rehmann Wealth, a Registered Investment Advisor. Insurance services offered through Rehmann Insurance Group. HLB is not affiliated with Rehmann Financial Network, LLC, or Rehmann Wealth.