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While the estate tax, often referred to as the “death tax,” is a hot-button topic in the US, it’s important to understand that its current form may not be permanent. Several vital provisions impacting the estate tax are set to sunset in 2026, potentially leading to significant changes in how estates are taxed. Sunset means that the laws expire on their own.

What are these sunsetting provisions?

How significant is the Impact?

According to the Tax Policy Center, without these provisions, the number of estates subject to the estate tax could jump from 2,100 in 2022 to 58,000 in 2026. This dramatic increase would primarily impact middle-income families who own businesses or have accumulated wealth over time. These numbers could also be affected by an aging population and inflation. Asset inflation, such as stocks and real estate, make more people subject to estate taxes.

What are the implications?

The potential changes raise several concerns:

What happens next?

The future of these sunsetting provisions remains uncertain. Congress will likely debate their continuation or modification in the coming years, influenced by various factors, including the political landscape and economic conditions.

Understanding these sunsetting provisions and their potential implications is crucial for individuals and families to consider as they plan for their future and the legacy they leave behind.

We cannot predict what congress will do. Our crystal ball is broken. What we can do is offer estate plans based on what is known and what currently exists.

Conclusion

Understanding the complexities and implications of sunsetting provisions in US estate taxes is crucial for effective estate planning and wealth management. These provisions, set to revert to pre-2017 tax laws unless legislative action is taken, can significantly impact estate valuations and tax liabilities. Estate planners and their clients must stay informed and prepared for these potential changes to safeguard their financial interests. Consulting with knowledgeable professionals, such as those at Thomas & Ahnell, LLC, can provide valuable guidance and strategies to navigate these evolving tax landscapes effectively.

Sources:

Internal Revenue Service: https://apps.irs.gov/app/vita/content/globalmedia/4491_filing_status.pdf

Tax Policy Center: https://www.taxpolicycenter.org/

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