The Clock is Ticking: How Inflation Adjustments to Estate Tax Exemptions in 2024 Could Be Your Last Chance to Secure Your Family’s Financial Future
The landscape of estate planning has never been more critical than it is today. With the federal gift, estate and GST tax exemption amount for 2024 increasing to $13.61 million per individual, families have unprecedented opportunities to transfer wealth—but this window is rapidly closing. Understanding how inflation impacts these exemptions and what the 2025 sunset means for your legacy planning is essential for protecting your family’s financial future.
Understanding the 2024 Inflation Adjustments
Each year, the IRS adjusts estate and gift tax exemptions for inflation, and 2024 brought significant changes. The federal estate, gift, and Generation Skipping Transfer tax exemption amount increased from $12.92 million to $13.61 million per individual, representing an increase of $690,000. For married couples, this means they can now shield a combined $27.22 million from the 40% federal estate tax.
Additionally, the annual exclusion amount for gifts increases to $18,000 in 2024 from $17,000 in 2023, allowing individuals to gift more money each year without affecting their lifetime exemption. These inflation adjustments provide clients who had previously exhausted their lifetime exemptions with the opportunity to make additional gifts, with an individual able to give away an additional $690,000 in 2024.
The Looming 2025 Sunset: A Critical Deadline
The most crucial aspect of current estate planning involves understanding the temporary nature of these historically high exemptions. The current lifetime exemption is historically high and presents an opportunity to transfer wealth before the current federal law expires on December 31, 2025, when the lifetime exemptions are reduced by about half to a base amount of $5 million per person adjusted for inflation, which currently projects to be an exclusion of $6.5 million to $7 million per person.
This dramatic reduction means that estates valued at around $13 million, which are currently exempt from estate taxes, will face a significant tax burden in 2026 unless Congress intervenes. The potential impact is staggering—families could lose millions in tax-free transfer capacity if they don’t act before the deadline.
Strategic Planning Opportunities Before the Sunset
The combination of current high exemptions and the impending sunset creates unique planning opportunities. The combination of the upcoming estate tax exemption sunset, low valuations, and high-interest rates makes now an ideal time for estate planning. Several strategies can help families maximize their wealth transfer potential:
- Lifetime Gifting: The most straightforward approach involves making substantial lifetime gifts to use current exemption capacity before it disappears
- Trust Structures: Strategic use of trusts, such as Delaware Dynasty Trusts, can help remove future appreciation from your taxable estate, provide asset protection, and preserve wealth across generations
- Spousal Lifetime Access Trusts (SLATs): A SLAT can be an effective tool for estate planning because the beneficiary spouse retains access to the trust assets during life
State-Level Considerations for New York Residents
For families in New York, state estate tax considerations add another layer of complexity. The New York estate tax exemption for decedents dying in 2024 increased to $6,940,000 from $6,580,000, which is significantly lower than the federal exemption. This creates additional planning opportunities and challenges that require careful coordination between federal and state strategies.
The Urgency of Acting Now
Time is a critical factor in estate planning, particularly given the approaching deadline. Time is running out to begin planning. Thoughtful estate planning takes time to develop and implement. Attorneys, CPAs, appraisers, insurance advisors and other estate planning professionals are already busy, and they will become overloaded as the deadline approaches.
The complexity of implementing effective strategies means that families cannot afford to wait. Estate tax planning becomes exponentially more expensive and complex after the exemption sunset. Strategies available today may be impossible or prohibitively costly to implement after 2025, making immediate action crucial for optimal wealth preservation.
Working with Experienced Estate Planning Professionals
Given the complexity and time-sensitive nature of these planning opportunities, working with an experienced estate planning attorney is essential. The Long Island-based law firm Fratello Law, founded by attorney Cheryl L. Fratello, understands the unique challenges facing New York families. As trusted Elder Law and Trusts & Estates attorneys, they focus on planning peace of mind with experience and compassion.
With offices in both Nassau and Suffolk Counties, Fratello Law takes the time to understand each client’s individual needs and builds lasting relationships with clients that span generations. Their comprehensive approach to estate planning ensures that families can navigate both current opportunities and future challenges effectively.
Taking Action: Your Next Steps
The inflation adjustments to estate tax exemptions in 2024 represent both an opportunity and a warning. While families can transfer more wealth tax-free than ever before, this opportunity has a definitive expiration date. The window of opportunity created by current exemption levels will not reopen after December 31, 2025. Families who act decisively now can preserve millions in wealth transfer capacity and provide lasting financial security for future generations.
The key is to begin planning immediately. Whether through direct gifting, sophisticated trust structures, or other advanced strategies, the time to act is now. Don’t let this unprecedented opportunity to secure your family’s financial legacy slip away—the clock is ticking, and December 31, 2025, will arrive sooner than you think.