Working with estate planning attorneys can involve a lot of emails projecting doom and gloom about changes in tax laws. With the sunset of the Tax Cuts and Jobs Act approaching on Jan. 1, 2026, it is not going to be as easy to get your tax and estate planning problems solved before the looming deadline.
For those who have overlooked or are otherwise not familiar, the TCJA overhauled much of the Internal Revenue Code in 2017. While more detailed discussions on TCJA can be found elsewhere on Forbes.com — Wealthy Families: Consider These Planning Ideas Before ‘The Sunset’ and Navigating The Sunset: A Guide To The Tax Cuts And Jobs Act’s Expiring Provisions, to name some examples — here’s the condensed version that has the attention of estate planning attorneys: The estate, gift, and generation-skipping transfer tax exemption amounts are currently the highest in U.S. history, at $13.61 million per U.S. citizen. But they will all sunset on Jan. 1, 2026 and revert back to pre-TCJA era levels, essentially cutting all of those exemptions amounts in half.
The current exemption amount of $13.61 million for estate, gift, and generation-skipping transfer tax is truly a golden age for estate planners and tax practitioners. Clients’ present ability to shelter historically significant amounts of wealth and all of its appreciation from the Internal Revenue Code’s Subtitle B of Title 26 of the U.S. Code (estate, gift, and generation skipping transfer tax) is something that may never happen again in our lifetimes if the TCJA is not extended. In general, clients must use their exemptions during their lives, through gifting to irrevocable trusts such as IDGTs, CLATs, and SLATs (often structured with Dynasty Trust provisions), and other advanced estate planning strategies before the Jan. 1, 2026 deadline or risk missing out on this opportunity.
These scenarios may sound familiar. Harken back to 2006-08 when estate planning attorneys were concerned over the sunset of President George W. Bush’s tax cuts. Formally known as the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate, gift, and generation-skipping transfer tax exemption amounts were purportedly going to drop from $3.5 million to $1 million when President Barack Obama entered the Oval Office in 2008. Doom and gloom predictions by certain estate planning attorneys did not come to fruition, as various legislative Band-Aids were stuck on EGTRRA in one form or another. There was that rather fascinating year of wealth-transfer tax chaos in 2010, until the American Taxpayer Relief Act of 2012 (ATRA) not only made various portions of EGTRRA permanent, but ATRA even raised the exemption amounts to $5 million and subjected such exemption amounts to inflationary adjustments over time. Estate planning attorneys are well aware of who was vice president at the time Obama helped facilitate ATRA getting passed. It was none other than current president Joe Biden.
So, why should clients listen to estate planning attorneys’ concerns this time around? Certainly, Donald Trump will extend his own tax laws in the TCJA if he gets elected for a second term, right? Or even if Biden gets reelected, isn’t there a decent chance he would do something similar to TCJA that Obama did to EGTRRA with ATRA? Well, this go-around, it is going to be much more difficult to make the significant TCJA tax cuts permanent. If you are trying to get some of the major advanced tax and estate planning transactions done, it is most likely going to be increasingly difficult to find available professionals with the level of experience and competency to help you complete them.
To make the various provisions of the TCJA permanent — including locking in the historically high estate, gift, and generation skipping transfer tax exemptions adjusted for inflation — elected officials in Washington, D.C. would need to raise additional tax revenue elsewhere to make up for the governmentally calculated losses caused by the TCJA. With all of the current tax revenue raising laws already in play for the federal government, yet still with an approximate U.S. federal debt now eclipsing $34 trillion, it seems like Congress is running out of new options. While I certainly do not want to cast doubt on lawmakers’ abilities to extend or make permanent the TCJA, their recent track record on getting things done and approval ratings are not the greatest of late. Worse, the odds of finding a team of professionals to handle advanced estate planning transactions before the Jan. 1, 2026 deadline might be equally as unlikely as TCJA getting extended the longer one waits.
While 2026 may seem way too far away to start worrying, if clients wait too long, they ultimately may miss out on utilizing the highest exemption amounts in U.S. history. Estate planning attorneys and related professionals needed to complete advanced estate planning transactions already are buried in existing workloads. For example, the aging U.S. population contributes significantly to the current demand. As Baby Boomers enter their twilight years, there has been a substantial surge in the need for estate planning services as individuals seek to safeguard their legacies in a tax-efficient manner and otherwise ensure their wishes are honored. And while the demand for estate planning services has substantially increased, the number of qualified and competent estate planning attorneys in many jurisdictions has nowhere near matched the demand. Simply put, the number of new attorneys with LLMs in Taxation or sufficient experience and training in the estate planning area is unfortunately lacking in 2024 according to many within the profession.
If the supply and demand of qualified estate planning attorneys is not enough to move people to take action, clients also need to understand that many of the advanced estate planning transactions will need a team approach. They often include a qualified CPA, appraiser, and financial advisor — all of which are facing the same types of demands from their own clients to get these complex transactions done. For example, to move forward on most advanced estate planning transactions, the financial advisor will need to provide the estate planning attorney with analysis on how much a client can gift to an irrevocable trust but still have sufficient assets remaining for the rest of their own lives. Additionally, the CPA will need to analyze the tax ramifications of a gift to an irrevocable trust and the impact of such if there is a future anticipated liquidity event involving the asset being gifted. In summary, if not everyone on the private wealth planning team is on the same page or helping to move the advanced estate planning transaction forward, the client will run out of time in utilizing the exemption amounts available pursuant to the TCJA.
Ultimately, the Jan. 1, 2026 deadline is becoming very real for the estate planning attorneys and private wealth planning professionals who have the unenviable and daunting task of trying to get advanced transactions done before the deadline. You may be very fatigued from the estate planning process. But before the sunset of the TCJA, you should muster up the strength to work with your attorney and take advantage of the current tax laws.
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