Springtime is a great time to review your current estate plan or consider creating one. This year brings a number of opportunities for creating an estate plan, pursuing gifting strategies, and considering philanthropic goals. Here is a highlight of a few estate planning opportunities for this year:
Increased Estate, Gift, and Generation-Skipping Transfer Tax Exemptions
In 2025, the estate, gift, and generation-skipping transfer tax exemptions increased to $13,990,000 per person. This is an additional $380,000 of tax exemption per person, which provides more gifting opportunities to those individuals who have previously made significant gifts. These exemptions provide a wide range of gifting opportunities including to gift portions of your family business to the next generation, transfer growth stock before the appreciation of that stock creates additional estate tax problems and assist your children with down payments on houses. Given the results from the November election, we initially expected these exemptions to be extended, but some recent activity in Congress leads us to believe such extensions may not be a high priority. Therefore, if you would like to make significant gifts during your lifetime, we strongly recommend that you explore the possibilities this year because the exemptions are presently set to decrease to approximately $7 million per person as of January 1, 2026.
Annual Gift Tax Exclusion – $19,000 Per Person
The 2025 annual gift tax exclusion is now $19,000 per person. This allows a person to gift $19,000 per individual recipient and not file gift tax return. One example of how to use this annual exclusion to further your legacy is to set up a custodial account under the Uniform Transfers to Minors Act (also referred to as UTMA) for each of your children and grandchildren and contribute $19,000 per child/grandchild. If you and your spouse have two children and four grandchildren, this will remove a combined $228,000 from your estate and will allow that money to grow for the benefit of your descendants. In addition, if you would prefer to not gift cash directly to your children or grandchildren, you may use the annual gift tax exclusion to gift to a 529 account and help fund their education. Further, 529 plans can be frontloaded by contributing $95,000 to each beneficiary in one year (double that if given jointly) so long as the contribution is treated as spread over a 5-year period. The annual gift tax exclusion is a great opportunity to reduce the amount of money in your estate this year without being required to file a gift tax return.
Charitable Bequests in Your Will or Revocable Living Trust
Including a specific bequest to a 501(c)(3) charitable organization in your Will or Revocable Living Trust is a great way to engage in philanthropy without gifting your assets immediately. There are two options for structuring a testamentary bequest to charity. The first option is to provide for a fixed dollar amount to the charity, such as $250,000. The upside of a fixed amount is that you know exactly what the charity will be receiving, but the downside is that if your estate decreases in value, the other beneficiaries will receive less because the bequest to the charity is unaffected by the value of the estate. The second option is to provide for a percentage of your estate to go to the charity. For example, the bequest can specify that the charity will receive 10% of your estate and 90% will go to your other beneficiaries, such as your children. Here, although the amount going to charity is variable, it does allow the other beneficiaries to receive the proportional share of your estate that you desire, and that proportion remains the same regardless of the fluctuation in value of your estate. Additionally, when making a charitable bequest in your estate plan, there may be benefits to advising the charitable organization of the gift because they may have matching programs or other benefits. Finally, the testamentary charitable bequest has the additional benefit of reducing your estate tax exposure.
