5 Proven Estate Planning Strategies to Utilize Before the 2026 Tax Sunset

Imagine this: The Tax Cuts and Jobs Act created a unique, but fleeting, opportunity for estate planning strategies. Currently, the lifetime exemption amounts are at an all-time high—$13.61 million for individuals and $27.22 million for married couples. However, this opportunity will disappear on January 1, 2026, when exemptions drop to about $7 million for individuals and $14 million for couples. This “use it or lose it” scenario means that actions taken today could save your family millions in future taxes. Conversely, failing to act could cost your family significantly, given the 40% federal estate tax rate. With the IRS confirming that utilizing the higher exemption now won’t be subject to a “clawback,” this moment is ideal for strategic estate planning. Let's explore the top strategies to maximize these temporary tax advantages.

Estate Planning for Families with Growing Wealth

Estate planning isn’t just for the very rich. Estate planning for growing wealth should be a priority for families with increasing assets. A couple with $5 million today could have much more in the future because investments grow over time. For example, the S&P 500 has grown an average of 7.3% each year over the past 30 years. This means an estate could double in value every 10 years. So, plan for where your wealth will be in the future, not just what you have now.

Estate Planning for High Net-Worth Families

For families with more than $20 million, planning is even more critical as 2026 approaches. For instance, a couple with $20 million should use their exemptions wisely. One spouse can use their $13.61 million exemption now. This protects a significant part of their estate from future taxes. The other spouse can save their exemption or use part of it for future growth.

Estate Planning Strategies

No matter how much money you have, these strategies can help reduce estate taxes:

• Grantor Retained Annuity Trusts (GRATs): With a GRAT, you put money into a trust and get payments back for a set time. After that time, the leftover money goes to your heirs without extra taxes. If you die during the trust term, the trust's money is taxed.
• Intentionally Defective Grantor Trusts (IDGTs): With an IDGT, you put assets like a business into a trust. The trust grows tax-free. You pay the taxes, which lowers your estate's value.
• Qualified Personal Residence Trusts (QPRTs): Put your home in a trust to lower its taxable value. You can still live there for a set time. After that, the house goes to your heirs.
• Charitable Remainder Trusts (CRTs): Give money to a CRT to get payments back for life or a set time. After that, the leftover money goes to charity. This can lower your taxes now and later.
• Family Limited Partnerships (FLPs): An FLP lets you give parts of a family business to your children. This can lower the value of your estate for tax purposes.

Planning Ahead

Many tax benefits from the 2017 law will end in 2025. This includes lower tax rates and bigger tax brackets. Planning now can help protect against higher taxes later. Use trusts, gifts, and partnerships to lower your estate taxes.

Your family’s future is too important to leave to chance. With the upcoming changes in the tax laws, the window for maximizing your strategic estate planning benefits is closing rapidly. By taking action now, you can safeguard your wealth and ensure a smooth transition for your heirs, especially for those focusing on estate planning for high-net-worth families and estate planning for growing wealth.

Start by consulting with your financial advisor or estate attorney to craft a plan tailored to your unique situation. Remember, the steps you take today can protect millions of dollars for your family tomorrow. Whether it’s utilizing trusts, making strategic gifts, or setting up partnerships, there are numerous ways to reduce your estate tax liability.

Don’t wait until it’s too late. The time to act is now. Your family is counting on you to make the right decisions. Secure their financial future and create a lasting legacy by leveraging these estate planning strategies before the tax changes take effect.

Take control of your estate planning today, and give your loved ones the gift of financial security and peace of mind.