As policymakers continue to debate the future of the estate tax, estate planners are once again faced with a period of significant uncertainty. With the scheduled expiration of the 2017 Tax Cuts and Jobs Act provisions at the end of 2025, several outcomes are on the table—including an extension of the bonus exemption, a return to pre-2017 exemption levels, or even full repeal of the estate tax.
The uncertainty doesn’t stop there. Some proposals call for repealing the federal estate tax while retaining the gift tax and the income tax-free step-up in basis at death. These conflicting proposals create a challenging environment for clients and advisors alike, requiring careful planning without the benefit of legislative clarity.
Key Planning Considerations
Use-It-or-Lose-It Exemption
The current bonus exemption remains a powerful planning tool. For high-net-worth individuals, acting now—before a potential reduction or repeal—can help preserve access to this temporary benefit.
Revisiting Existing Documents
In light of possible tax law changes, clients should review and update their existing estate planning documents. Flexible provisions and updated structures can help ensure plans remain effective across a range of legislative outcomes.
Planning Amid Uncertainty
Rather than delaying planning until Congress acts, clients should move forward with strategies that allow for flexibility. The panel explores several techniques designed for adaptability, including:
- Standby and Revocable Trusts to allow rapid implementation of plans.
- QTIP Trusts and Disclaimer Planning to maintain control and optionality
- Qualified Disclaimers and Rescission Techniques to unwind transfers if needed
- SPATs (Special Power of Appointment Trusts) to retain potential basis step-up
- Trust Protectors and Powers of Appointment to adjust trusts over time
Expanding Beneficiary Options
Incorporating broader or more flexible beneficiary classes—including charitable beneficiaries, spouses, and entities—can help with long-term tax planning, grant greater control over asset distribution, and support income tax strategies in evolving circumstances.
Access and Asset Protection
For clients concerned about tying up assets too tightly, structures like hybrid Domestic Asset Protection Trusts (DAPTs) and tailored powers of appointment can offer a balance between accessibility and protection.
The Path Forward
Estate planning today requires a forward-looking, flexible approach. Even if the estate tax is repealed, other risks—including future reinstatement, state-level taxes, creditor exposure, and family changes—make proactive planning essential.
The strategies discussed provide planners with tools to help clients prepare for a wide range of outcomes. Rather than pausing in anticipation of clarity, now is the time to act thoughtfully and build plans that can withstand change.