When someone passes away in Florida, their estate often has to go through a legal…
You may need to update your estate plan annually to account for changes in federal estate tax law, gifts, and generation-skipping transfer (GST) tax exemptions.
Since 2018, federal estate tax exemptions have allowed estates above $11.7 million (adjusted annually for inflation) to avoid federal estate tax. However, these exemptions are scheduled to change on January 1, 2026, when they may return to lower pre-2018 levels.
Any estate valuation above the applicable exemption amount may trigger a 40% federal estate, gift, and GST tax rate. Because tax laws can directly impact estate planning strategies, reviewing your estate plan regularly is essential.
Changing Estate Tax Exemption Amounts: 2017 – 2025
Federal estate tax exemption amounts have changed significantly over recent years. These changes can impact how individuals structure their estate plans, gifting strategies, and trusts.
Estate Planning Strategies for Changing Tax Laws
Even if your current taxable estate is below $12.6 million, planning ahead is important. Future federal estate tax changes may significantly affect existing estate planning techniques.
When current federal tax laws change on January 1, 2026, estate planning strategies may need to be adjusted. While exact exemption amounts cannot be predicted, some proposals suggest reducing estate and gift tax exemptions from $12.6 million per individual taxpayer to between $3.5 million and $6.85 million.
Taking action now may help position your estate for future changes. Lifetime gifting remains an important strategy, even for individuals whose estates are currently below the federal exemption threshold.
Estate Tax Strategies Designed for Your Situation
Reviewing your current estate planning documents is essential to ensure they continue to align with your goals. Changes in federal exemptions can significantly impact how your estate plan operates.
For example, if your will states that an amount equal to your remaining federal exemption should pass into a bypass trust or credit shelter trust for your surviving family, the remaining assets may pass directly to your spouse.
If you have a $10 million estate today and have not used any lifetime exemption, the entire estate may pass into trust under current planning documents. Depending on your state of residence, this may create unintended consequences, including potential state estate tax concerns.
Understanding how tax laws affect your estate plan is critical for protecting your family’s inheritance and ensuring your wishes are followed.
Gifting Strategies for Estates Over the Tax Threshold
If your taxable estate exceeds the current exemption threshold, one strategy may be to begin transferring assets through gifting.
Gifting can remove assets from your taxable estate. It can also remove future appreciation on those assets from your estate from the date of the gift until your death.
Reviewing your estate planning documents with an attorney can help determine whether gifting strategies are appropriate for your situation.
Annual Gift Tax Exclusions
Many traditional tax-saving strategies remain useful. Annual gifting exclusions allow individuals to transfer assets without using their lifetime exemption.
- $16,000 per recipient annually.
- $32,000 per recipient when spouses split their gifts.
- Additional exclusions may apply for qualifying medical and educational expenses.
Medical and education gifts, sometimes called “Med/Ed” gifts, must generally be paid directly to the medical provider or educational institution.
Contributions to a 529 education plan may also affect annual exclusion amounts. Your estate planning attorney can help you understand how these gifting strategies fit into your overall plan.
Estate Tax Planning With Trusts
Trusts are commonly used as part of estate tax planning strategies. They can help reduce tax consequences, protect assets, and control how wealth passes to future generations.
For example, a Crummey Trust allows individuals to make gifts to a trust while maintaining eligibility for annual gift tax exclusions. Beneficiaries must receive proper notice regarding these gifts.
The right trust depends on your financial situation, family circumstances, and estate planning goals.
Common Estate Tax Planning Trust Strategies
- Spousal limited access trust (SLAT)
- Intentionally defective grantor trust (IDGT)
- Dynasty Trust
- Intrafamily loans
- Grantor retained annuity trust (GRAT)
Estate Planning and Tax Laws Vary by State
Estate tax planning depends on where you live and whether you own property in multiple states. Each state has different estate and gift tax rules.
Your estate planning attorney can explain how federal and state exemptions interact and recommend updates to your estate documents when necessary.
If you live in a state with estate taxes, addressing these rules is an important part of developing an effective federal estate tax strategy.
Why Review Your Estate Plan Before 2026?
Because current tax laws are scheduled to change, there may be a limited opportunity to reduce your taxable estate through gifting or establishing trusts.
Even without additional Congressional action, federal exemption amounts may decrease significantly beginning January 1, 2026.
Reviewing your estate plan now allows your attorney to determine whether your gifting strategy, trusts, and estate documents still support your goals.
Speak With an Estate Planning Attorney
Estate tax laws are complex and constantly changing. An experienced estate planning attorney can help you understand how these changes may affect your family and your future.
To learn more about how one of our experienced elder law attorneys can assist you or a loved one, contact us at (352) 565-7737. We look forward to hearing from you.
