For the past five years, taxpayers have enjoyed historically high gift and estate tax exemptions, thanks to the Tax Cuts and Jobs Act of 2017. This legislation doubled the exemption from approximately $5.5 million to $13.61 million per person (adjusted for inflation) in 2024. The annual gift exemption also increased to $18,000 per donee in 2024.

This substantial exemption has allowed individuals and families considerable flexibility in their estate planning. Couples can effectively combine their exemptions, enabling them to gift up to $27.22 million in 2024, either during their lifetimes or at death, without incurring federal gift or estate tax. It’s crucial to file a timely estate tax return to elect the portability of the deceased spouse’s unused exemption to the surviving spouse. Assets transferred beyond the exemption amount are typically subject to a 40% tax rate.

How many estate tax returns are filed annually, and how much tax is paid? The latest IRS data provides detailed statistics on who filed estate tax returns in 2021: 

• 6,158 returns were filed with a total estate valuation of $190 billion 
• More than half of the returns (3,284) filed were in the $10-$20 million gross estate range
• 1,737 returns filed (28%) had gross estates of $20-$50 million  
• 2,584 returns were taxable and paid over $18.4 billion in taxes 

The critical point is that unless Congress takes further action, the exemption provisions of the Tax Cuts and Jobs Act of 2017 are set to “sunset” on December 31, 2025. This means that by 2026, the estate and gift tax exemption may be cut in half, possibly falling to between $6 million and $7 million, depending on inflation.

To navigate these changing tax dynamics, taxpayers should consult their estate planning professionals. This is especially recommended if it’s been several years since documents were prepared or reviewed. 

Estate planning is not a one-time event; it’s an ongoing process that should adapt to changes in life, business, and tax laws to achieve the best outcomes for your family and assets.