Estate planning is a crucial aspect of personal finance that cannot be ignored, especially by business owners. It ensures that assets are distributed according to your wishes after death and that your loved ones are taken care of financially. However, many business owners often procrastinate on estate planning, assuming that they have plenty of time to make arrangements. Unfortunately, with the current U.S. estate planning laws set to sunset after 2025, time is running out for those looking to capitalize on higher exemption amounts.
Under the Tax Cuts and Jobs Act of 2017, the estate and gift tax exemption is set at $11.7 million per person, which means that an individual can transfer up to $11.7 million in assets without incurring any federal estate or gift tax. For married U.S. citizens, the exemption doubles to $23.4 million. With inflation adjustments through 2023, the total amount is now up to over $25.8 million. However, these laws are set to expire at the end of 2025, reducing the exemption to the pre-2017 level of $5.49 million per person, adjusted for inflation. This means that the estate tax will impact many more families, including those who would not have been previously.
Plan ahead, proper estate planning takes time
Estate planning is a complex process that takes time. It involves evaluating assets, setting up trusts, selecting beneficiaries, and ensuring that all legal documents are in order. Rushing through this process could result in errors and oversights that could have significant consequences down the road. By starting the estate planning process now, business owners can ensure that everything is done correctly and that their wishes are carried out.
Avoid legislative surprises
Business owners should also consider the possibility of legislative changes. The current estate tax laws are subject to change, and future legislation could make estate planning more complicated and less favorable. By acting now, business owners can secure their financial future and protect their assets from any unexpected changes in estate tax laws.
Act now to preserve your legacy
With the current US estate planning laws set to sunset after 2025, business owners cannot afford to wait any longer. As it stands, the estate and gift tax exemption provides a significant opportunity for business owners to transfer wealth to their loved ones tax-free, but this opportunity is time-limited.
Waiting until the last minute could result in missed opportunities, higher taxes, and even legal disputes. By starting the planning process now, business owners can ensure that the companies they've worked so hard to build are protected in the future as well.
Our dedicated estate and gift tax specialists have helped clients reduce tax liability and preserve wealth for decades and are well-equipped to help you properly plan for your estate. Seeking counsel from a qualified advisor is a great first step to taking advantage of the current high estate and gift exemption threshold.
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