Secure your estate ahead of the lifetime exemption sunset

Waiting until you need something to invest in it is usually an ineffective approach to financial planning — and the same is true for estate planning.

Planning for your wealth transition and overall estate helps ensure the future of your financial legacy. And yet estate planning often remains overlooked or fails to reflect the latest changes in life or law.

Now, new urgency for estate planning is coming from the looming sunset of the doubled lifetime exemption that was put into place under the Tax Cut and Jobs Act (TCJA) of 2017.

Effective January 1, 2026, the lifetime exemption is no longer doubled and reverts to the $5.49 million 2018 set for inflation.

With the upcoming lifetime exemption sunset, it’s critical to take a current look at your estate planning situation.

Doubled lifetime exemption sunset

The TCJA doubled the amount of value an individual could give away (lifetime gifting or upon death), from $5.49 million to $11 million.

These lifetime exemptions have been set for inflation annually since 2018. In 2024, each individual has an eligible lifetime exemption of $13.61 million; 2025 is expected to be around $14 million.

But with the exemption sunset effective January 1, 2026, the lifetime exemption is cut in half, resulting in an eligible lifetime exemption of around $7 million for each individual.

To help understand the potential impacts, consider a taxpayer with an estate worth $20 million. Their taxable estate would go from an estimated $6 million to $13 million, assuming they did nothing prior to the effective date. It would also result in additional potential estate taxes of $2.8 million (for $7 million at 40%).

The exemption has made estate planning an immediate concern for those looking to preserve their financial legacy. If you’re uncertain of whether you need a plan or how to improve your existing plan, consider these key factors:

Understanding your estate planning situation

Estate planning doesn’t just concern the ultra-wealthy. Many people might be surprised to find they have a potential estate tax problem.

The first step to understanding a need for an estate plan is understanding what makes up your taxable estate. A taxable estate is not only liquid assets, cash and investments — it can include physical assets such as homes, retirement accounts and any other asset you hold personally.

As a result, poor or lacking estate planning can lead to unexpected estate taxes and unnecessary financial loss.

Without proper planning, assets may be subject to high estate taxes or lengthy probate processes. This can eat into the value of your estate and reduce the amount that beneficiaries ultimately receive. Moreover, proper planning can provide comfort and security in knowing your assets will be directed as you wish or available for important purposes, such as education or healthcare.

Combined with the potential halving of the exemption, it’s crucial to take a current look at your estate.

The benefits of estate planning

Many consider estate planning a tax savings mechanism, particularly as an effective way to shift assets with great appreciation out of a taxable estate at a much lower cost. However, a well-executed estate plan can also provide benefits such as:

• Family privacy
• Specific asset designation
• Multigenerational wealth preservation
• Charitable planning techniques
• Asset protection

With the potential estate and gift exemption sunset, now is the time to explore your personal needs and plan for your future legacy.

How Wipfli can help

Wipfli’s robust team of estate advisors, along with our valuation and business specialists, work as a single unit to help you achieve your individual goals. We understand that no two estate plans are made the same and that time, thought and consideration are necessary with each client. That’s why our approach results in a personalized plan that’s unique to you and your family’s needs, and why we’re ready to make sure it always reflects your current life events.

Contact us to learn more about our estate planning solutions.