In 2017, the Tax Cuts and Jobs Act (TCJA) brought about significant shifts in the U.S. tax landscape. One of the most impactful changes was the alteration of the federal estate tax exemption. As we approach 2026, understanding the implications of the TCJA’s expiration is crucial, especially for residents of Texas as our Houston, TX estate tax lawyer can share. Let’s delve into what this means and why it is so important in the coming year.
The Sunset Of The TCJA And What To Expect In 2026
The increased exemption provided by the TCJA is set to expire on January 1, 2026, unless Congress acts to extend it. The exemption is expected to revert to around $6 million per individual, adjusted for inflation, which means approximately $12 million for married couples.
This reversion could bring many Texas estates back into the taxable category. Families who previously didn’t need to consider estate taxes may now find their estates subject to federal taxes, making it essential to reassess estate plans soon as Stuart A. Green can share since he has worked with changes like these since 2021 when he founded his own practice.
Why This Change Is Crucial Now
The next 12 months are vital for estate planning in Texas. Here are key reasons why:
• Review Estate Plans: Texans should review their estate plans to prepare for the lower exemption. Trusts, wills, and other documents may need updates to maintain tax efficiency.
• Strategic Gifting Opportunities: The current higher exemption offers a chance for strategic gifting. By transferring assets now, Texans can reduce their taxable estates and take advantage of the higher exemption before it decreases.
• Utilize Trusts: Trusts remain a powerful tool for managing estate tax liability. Irrevocable trusts like Grantor Retained Annuity Trusts (GRATs) and Charitable Remainder Trusts (CRTs) can help reduce taxable estates while providing financial benefits.
• Maximize Lifetime Exemptions: The current high exemption allows significant lifetime transfers without gift taxes. This can be a valuable strategy for reducing estate tax liability upon death.
• Seek Professional Advice: Given the complexity of estate tax laws, consulting with an experienced estate planning attorney like Stuart A. Green in Houston, Texas, is essential. He serves clients throughout Texas, providing tailored advice to navigate these changes effectively.
Overview Of The 2017 TCJA
The TCJA, enacted in December 2017, aimed to boost economic growth by reducing tax burdens. A key component was the substantial increase in the federal estate tax exemption. Prior to the TCJA, the exemption was about $5.49 million per individual. The TCJA nearly doubled this, raising the exemption to $11.18 million per individual, now adjusted to $13.61 million for 2024.
Effects Of The Higher Exemption
The higher exemption meant that many estates in Texas were no longer subject to federal estate tax. A married couple could now potentially exclude up to $27.22 million from estate taxes, allowing more wealth to be transferred to heirs without federal taxes.
For many Texas families, this change reduced the necessity for complex estate planning strategies. Trusts, gifting tactics, and other methods to minimize estate taxes became less critical for estates under the new threshold.
The expiration of the TCJA provisions in 2026 signifies a major shift in the estate tax environment. For Texas residents, the next 12 months are a crucial period for reviewing and adjusting estate plans. Taking proactive steps now ensures your estate plan remains effective and aligned with your financial goals. Stuart A. Green, an esteemed attorney in Houston, emphasizes that careful planning today can secure your legacy for the future, despite the uncertainties ahead. Contact Stuart Green Law, PLLC for help today; he is licensed in Texas, Kentucky, Pennsylvania, and South Dakota.