The federal estate/gift tax exemption amount and the generation-skipping transfer (GST) tax exemption amount are both $13.61 million for 2024 (a $5 million base exemption, doubled in 2017 to $10 million and indexed for inflation). Under current law, this figure will become $13,990,000 on January 1, 2025, but it is scheduled to drop significantly on January 1, 2026, when the 2017 law that doubled the base exemption sunsets.
Now, however, we know the election results, and they portend a shift of power in both houses of Congress and the White House. Gridlock in Congress would have meant that the sunset would happen by default, but now extension of the higher exemption levels beyond the January 1, 2026 sunset date appears more likely. This may alleviate urgency among those who had been feeling pressure to create and fund irrevocable trust structures before the scheduled sunset to consume their gift tax exemptions (though those in DC and MD, and other states with a state-level estate tax, will still consider gifting in appropriate circumstances to reduce exposure to state estate tax).
Fiscal scoring on lost revenue from extending the higher estate/gift and GST tax exemptions may mean that Congress opts to extend them only a few years (or ten), rather than permanently, or it may mean a tradeoff somewhere else in the tax code. It’s early days now, and we may see several competing proposals, or nothing at all until the issue becomes ripe for lawmakers’ attention at the eleventh hour, when the sunset is upon us (or when those first estate tax returns for decedents dying January 1, 2026 are due to be filed). Watch this space.
