TheStreet
Planning for 2025 and Beyond: Tax Changes You Should Know about
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfil their religious and moral obligations towards charitable activities)
Reviewing recent and upcoming changes to the tax code could benefit your wealth planning for the year to come — and the years ahead.
The end of the year is a time of celebration with family and friends as we look forward to what’s to come. From a wealth-planning perspective, what’s to come could include significant change — especially as some tax code changes are getting closer to shifting again.
The Tax Cuts and Jobs Act of 2017 (TCJA), which lowered tax rates and doubled estate, gift, and generation-skipping transfer (GST) exemption amounts, is scheduled to sunset at the end of 2026. (It also could end earlier, or be extended, depending on political action.) Meanwhile, provisions in the Secure 2.0 Act could impact future tax planning.
Given the uncertainty of potential changes to the tax laws, maximizing annual and lifetime exclusions while minimizing transfer taxes is only one part of overall wealth and estate planning, but there’s a window of opportunity today that makes planning for the next few years more important than ever. Here are four issues to discuss with your key advisors.
1. Exemption rates are likely going to change
For the 2023 tax year, tax-exempt federal estate and gift tax threshold is $12.92 million per individual ($25.84 million for couples) during a lifetime or at death. This number is expected to rise in 2024 and 2025 before being cut roughly in half, though this also could change depending on political action. The same changes may ultimately apply to the GST exemption, which allows families to avoid a 40% tax on transfers to grandchildren and other eligible parties. These exemptions are in addition to the annual gift tax exclusion, which in 2023 stands at $17,000 for individuals and $34,000 for couples, per recipient.
While 2026 may seem like the distant future, those with a net estate of more than $7 million (or $14 million for couples) who may face estate tax implications in 2026 or later may help their beneficiaries by discussing the tax cuts expiration. That could mean passing on wealth with your generation or transferring assets out of the estate to lock in the increased exemption amounts, if appropriate.
2. Understand lifetime giving opportunities in light of tax reform
While you should consider having those conversations with your advisors to help plan well in advance of the 2026 deadline, you might be worried to live too long to give money you may need to live comfortably. An advisory team can discuss a number of solutions, including trusts such as spousal lifetime access trusts and qualified terminable interest property trusts, and partnership structures that could strike the right balance for your situation.
Trust design can be complicated, so be sure to enlist the help of an experienced estate planning attorney to guide your decisions and maximize benefits.
(To be continued)
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
