As we approach 2025, significant changes are on the horizon that will impact estate planning for many individuals and families. Specifically, the federal estate tax exemption is set to be significantly reduced when the provisions of the 2017 Tax Cuts and Jobs Act expire. Currently, the estate tax exemption is set at an historically high level of $13.61 million per individual (and $27.22 million per couple), but this exemption will revert to approximately $5.49 million per individual at the end of 2025. This change could have substantial financial implications for those with estates valued over the exemption limit.
For individuals and families who have been relying on the current exemption to protect their assets from federal estate taxes, now is the time to consider action. If there are assets you plan to hold on to for future generations, especially those intended to remain in the family for the long term—such as businesses, real estate, or investments—an irrevocable trust could provide critical protection and unprecedented tax savings.
Why Consider an Irrevocable Trust?
An irrevocable trust is a powerful tool in estate planning that helps remove assets from your taxable estate by using your lifetime gift tax exemption while it’s still available. Once you transfer assets into an irrevocable trust, those assets no longer belong to you and are managed by a trustee for the benefit of the designated beneficiaries. This means the assets are not subject to federal estate tax upon your passing, potentially saving your heirs from a significant tax burden when the estate tax exemption decreases. In essence, it’s a “use it or lose it” proposition.
Preserving Generational Wealth: By transferring assets into an irrevocable trust now, you can utilize the current estate tax exemption. This ensures that any appreciation in value of those assets is sheltered from future estate tax exposure, which could drastically increase once the exemption shrinks.
Control Over Asset Distribution: An irrevocable trust allows you to specify how and when your beneficiaries receive the assets, offering you control and peace of mind in terms of protecting your legacy.
Creditor and Lawsuit Protection: In addition to tax benefits, irrevocable trusts also provide protection against creditors and lawsuits. This ensures that your assets are safeguarded not only from the IRS but also from any potential legal claims that may arise against you or your beneficiaries in the future. (Settlement time periods apply.)
The Time to Act Is Now
While 2025 may seem like a distant date, in estate planning, time is of the essence. Setting up an irrevocable trust can be a complex process that requires careful consideration of your financial situation, future goals, and the specific needs of your beneficiaries. It’s crucial to start the conversation with an experienced estate planning attorney now to ensure your plan is fully implemented before the estate tax exemption twilights.
At Pace Johnson Law Group, we are committed to helping you navigate these changes and ensure your wealth is protected for generations to come. Our experienced estate planning team is here to guide you through the process, explain your options, and implement a strategy that meets your goals. Don’t wait until the federal estate tax exemption drops because then it will be too late—contact us today to explore whether an irrevocable trust is right for you and your family.
Schedule a Consultation Today
Secure your family’s future before the federal estate tax exemptions are reduced. Schedule a consultation with our estate planning attorney to discuss how an irrevocable trust could benefit you. The clock is ticking—act now to protect your legacy.
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