Learning Center
We keep you up-to-date on the latest tax changes and news in the industry.
Where is Estate Tax Going in the Future?
Article Highlights
- Estate and Gift Tax Lifetime Exclusion Amount
- Gifting While the LEA is at its Current Level
- Annual Gift Tax Exclusion
- Inherited Basis
- Capital Gains Rates
- Tax Planning
However, the provisions of TCJA are temporary, and unless Congress makes changes, the exclusion will revert to the pre-TCJA amount of $5 million (estimated to be $6.2 million when adjusted for inflation) beginning in 2026. However, the elections in November, depending on which party comes out on top, could change all that, since several of the current Democratic candidates propose to reduce the LEA, with $3.5 million the amount most often mentioned.
Recently, there has also been concern among financial experts and estate attorneys related to what will happen if large gifts are made while the LEA is at the higher lifetime exclusion amount and then the exclusion amount reverts to the pre-TCJA amount. Would those larger gifts become taxable in excess of the lower LEA?
Luckily, the final regulations issued by the IRS provide a special rule that allows an estate to compute its estate tax using the higher of the LEA applicable to gifts made during life or the LEA applicable on the date of death. Thus, making large gifts now won’t harm estates after 2025, something wealthier taxpayers should take into their planning considerations.
Gifting While the LEA Is at Its Current Level – So, it may be appropriate for those with larger estates to consider taking advantage of the current larger LEA and make larger gifts before the LEA reverts to lower levels or Congress changes it to a lower amount. Of course, when considering such gifts, one would need to be sure the remaining estate would sustain one’s current lifestyle adequately without undue risk. It is also important that the gifted assets, if not cash, will hold their value so the LEA is not used up on gifting assets that might subsequently decline in value.
Another consideration in gifting assets is that the gift recipient, referred to in tax lingo as the donee, assumes the tax basis of the donor, so the gift essentially passes to the donee with any tax liability of the donor, even though the current gift amount is determined using the current fair market value of the asset.
Annual Gift Tax Exception – Gifting reduces an estate and is the reason there is a gift tax—to prevent estates from being gifted away prior to death and depriving the government of estate taxes. In addition to the LEA, there is an annual gift tax exclusion that allows a donor to gift up to as much as $15,000 (inflation adjusted amount for 2020) per year to as many recipients (related or not) as they would like. For example, a parent with four children could give each of them $15,000 without any gift tax ramification. A married couple could give each child $30,000 per year. If the children were married, the parents could gift the couple up to $60,000 per year. In addition to the $15,000 annual exclusion, there are two situations in which gifts don’t count toward the annual exclusion amount: when a donor makes payments directly to an educational institution for the tuition of a donee (does not include other education expenses) or payments are made directly to any person or entity providing medical care for the donee.
Inherited Basis – Another current aspect of estate planning is that inherited assets have their tax basis adjusted to the fair market value of the asset at the time of the decedent’s death. This is commonly referred to as a “step up in basis.” As a result, estate beneficiaries will incur little or no taxable profit if the inherited property is immediately sold. However, a number of presidential candidates are proposing to do away with “step up in basis,” adding another variable to the long-term estate planning issues.
Capital Gains Rates – Currently, inherited assets are immediately, upon inheritance, treated as being held long-term and benefit from the special lower tax rates for long-term capital gains. Virtually all of the Democratic candidates have indicated they would like to see the special long-term capital gains rates eliminated and all gains subject to the ordinary tax rates that apply to other types of income, such as wages.
Tax Planning – All these possible variations, including a probable substantial change in the LEA in the future, the possible elimination of “step up in basis” for inherited assets, and potential abolishment of capital gains rates, make it very difficult to develop estate plans with any long-term certainty.
Those with substantial estates should follow future developments and adjust their estate planning accordingly. If you have questions related to estate tax issues, please give this office a call.
Want our best tax and accounting tips and insights delivered to your inbox?
Sign up for our newsletter.
Benefits of having a business advisor
Your CFO, Reimagined as a Financial Doctor
Diagnosing root causes, prescribing solutions, and guiding your property business toward long-term wealth.
Our CFO | Advisor
Raquel is a passionate business owner. Now, she is returning to her grassroots with a twist - guiding clients with her expertise as a CPA, she can advise your company as your trusted CFO and Advisor.
-
Raquel Deodanes, MS, CPA
Co-Founder✅ CPA with Real-World Experience – I help property managers stay profitable, tax-efficient, and cash flow positive.
✅ Tax Strategist – Former advisor at California’s revenue agency.
✅ Trusted by 4,000+ Businesses – Experience across CA, FL, TX, NV, and beyond.
✅ Real Estate Investor – I understand the financial realities of property management.
✅ Entrepreneur – I’ve built businesses and know the challenges you face.
Frequently Asked Questions
-
We diagnose financial inefficiencies, treat problems like poor cash flow or rising costs, and guide you to long-term financial health. That includes cleaning up your books, forecasting cash flow, optimizing operations, and helping you grow your portfolio with confidence — just like a doctor builds a custom care plan for a patient.
-
Bookkeepers record transactions. CPAs file your taxes. We connect the dots — helping you understand your numbers, strategically improve them, and make smarter decisions throughout the year. We work alongside your existing team to drive performance, not just compliance.
-
If you're unsure where your cash is going, struggling with rising costs, planning to scale, or just tired of reacting instead of planning — now is the right time. We help you get ahead of problems, not just clean up after them.
-
Clients typically see improved cash flow, cleaner books, higher NOI, better financial reporting, and a lot less stress at tax time. More importantly, you gain clarity, confidence, and control over your business — and a partner who helps you grow it.
Pricing
Painless, transparent pricing.
Let us take away your stress and give you back your time. Choose your perfect package today.
Base
-
Dedicated finance expert
-
Bookkeeping with accrual basis
-
Includes P&L, balance sheet, and cash flow statements
Core
-
Includes everything in Base, PLUS
-
Industry KPIs and financial ratios
-
Monthly virtual 1-hr meetings
-
Monthly rolling budget forecasts
Growth
-
Includes everything in Base, CORE
-
Budget vs. actuals variance analysis and review
-
Payroll and HR Platform