In October 2024, we’re now less than a month away from the next presidential election in the U.S., and it’s important to understand the estate tax implications related to this election. The key takeaway regarding estate tax for 2024 is that there are significant changes on the horizon, regardless of the election’s outcome. Effective January 1, 2026, the current estate tax laws are set to revert to older laws, which could impact the estate tax exemption limits. Let’s start by looking at the current situation: in 2024, each individual can pass up to $13.61 million in assets, either during their lifetime or upon death, free of estate tax. This $13.61 million is known as the estate tax exemption, and any amount exceeding this threshold is subject to estate tax, which can quickly reach a rate of 40%.
Last year, the exemption was slightly lower, around $12.9 million per person. Married couples can also combine their exemptions, allowing them to pass over $27 million in assets tax-free if one spouse passes away without using their exemption. This exemption will be indexed for inflation next year, though we won’t know the exact 2025 amount until the Treasury releases it.
However, as of January 1, 2026, the exemption is scheduled to return to its pre-2018 level of $5.49 million, adjusted for inflation, which experts believe could mean around $6 to $7.5 million per person. This reduction is due to the expiration of the Tax Cuts and Jobs Act of 2017, which was implemented by the Trump administration and temporarily raised these exemption levels.
If the upcoming election leads to a change in administration, there’s a chance that the exemption could not only revert to the older level but potentially be reduced even further, as some candidates have suggested. On the other hand, if Trump is re-elected, he could extend the current laws, though there’s no guarantee. Regardless of these potential changes, individuals can make estate tax plans today and lock in the current, higher exemption levels by transferring assets up to the 2024 or 2025 limit. If the exemption amount reverts to a lower level in 2026, any assets transferred within the higher exemption limit will not be penalized. The most critical point to know in 2024 about estate tax is that a major change is coming in 2026, which could have significant implications for estate planning.