icon on As lawmakers debate the future of the federal estate tax, many tax professionals and legal experts are rallying behind a proposal that favors predictability over elimination. Their message is clear: a stable estate tax framework is more valuable than the uncertainty that would come with a full repeal.
What’s on the Table?
A new reconciliation bill passed by the House proposes to:
- Lock in a $15 million exemption per person (or $30 million per couple) starting in 2026.
- Adjust that amount annually for inflation.
- Keep the 40% tax rate for estates, gifts, and generation-skipping transfers above the exemption.
This move would prevent the exemption from dropping back to pre-2018 levels—around $7 million—when the current provisions expire at the end of 2025.
Why Consistency Wins
Estate planners say that having a fixed exemption amount helps clients make informed decisions without constantly adjusting their strategies. Even if future administrations change the rules, a clear baseline now allows for more thoughtful, long-term planning.
“In estate planning, uncertainty is the enemy of good decision-making,” said Ryan Gardner, Trust & Estate Planning Practice Group Leader at Howard & Howard. “Locking in a higher exemption now gives families the clarity they need to plan confidently for the future.”
A Look Back: Estate Tax Evolution
The estate tax has been anything but static. Since its introduction in 1916, it has seen numerous overhauls:
- In 2001, the exemption was just $675,000, with a top rate of 55%.
- The tax was briefly phased out in 2010, then reinstated in 2012 with a $5 million exemption and a 40% rate, which remains today.
Repeal: Easier Said Than Done
While some lawmakers continue to push for a full repeal—often citing the burden on family farms and small businesses—experts argue that such a move is unlikely to succeed. Political hurdles and fiscal concerns make repeal a tough sell, and many existing estate plans are built around the assumption that the tax will remain.
“While repeal sounds appealing, it’s not realistic in today’s political and fiscal climate,” George Malis, Trust & Estate attorney at Howard & Howard, said. “Clients should plan for what’s likely, not what’s ideal.”
Planning Ahead: 2025 as a Pivotal Year
With the exemption set to change in 2026, individuals with sizable estates face a key decision in 2025: act now under the current rules or wait and risk a lower exemption. Fortunately, any planning done under today’s law will still be honored, even if the rules shift later.
The Gift Tax Stays Put
Interestingly, even repeal proposals have avoided touching the gift tax, which helps prevent large, untaxed transfers of wealth. Removing it could open the door to income shifting and significantly reduce federal revenue.
A Strategic Opportunity
A higher, permanent exemption could also encourage people to hold onto appreciated assets until death. Why? Because heirs benefit from a step-up in basis, which resets the asset’s value for tax purposes and can eliminate capital gains taxes entirely.
“Every estate is unique,” Gardner said. “The right strategy depends on your goals, assets, and timeline. 2025 is a critical window, and acting now under the current rules could save millions in taxes – and those who wait, may miss out.”