Estate planning in 2025: What you can do now

We’ve been down this road before. Congress is yet again discussing changes to the transfer tax rules, and this time, uncertainty is compounded by the impending sunset of the temporarily increased estate/gift and generation-skipping tax (GST) exemptions under the 2017 Tax Cuts and Jobs Act (TCJA). The “wait and see” approach is a common response to uncertainty, leaving many in a state of limbo with respect to estate planning. You may find yourself grappling with the decision of whether to make large gifts now or to hold off, hoping for clearer guidance in the future. While the unpredictability of Congress’s actions can make you hesitant to act, the best course of action is to plan now. Below, we discuss ways to continue your estate planning efforts by incorporating flexible strategies that allow you to adapt and make informed decisions as circumstances evolve.

Why should you care?

The estate & gift exemption amount is generally the amount that you can transfer during life or at death to others without incurring a 40% estate or gift tax. The estate & gift exemption amount is adjusted for inflation each year and is $13.99 million per individual ($27.98 million for a married couple) in 2025. An additional and separate 40% generation-skipping transfer tax is imposed on transfers that ‘skip’ a generation (such as a transfer to a grandchild), with the same exemption amount as the estate & gift exemption.

However, these lifetime exemption amounts are scheduled to be cut in half at the end of 2025. The TCJA doubled the lifetime exemption amount beginning in 2018. Since then, the exemption amounts and the question of whether Congress will allow the TCJA to sunset on Dec. 31, 2025, or extend it, have been in a constant state of flux. While the exemption amounts are always subject to change, the ‘use it or lose it’ nature of the temporarily increased exemptions pressures individuals to consider making significant transfers prior to the end of the 2025 calendar year. However, it’s important to remember that estate planning should not be driven solely by tax considerations, but also by the broader goal of ensuring your financial legacy and the well-being of your loved ones.

What can you do now to prepare?

As the 2025 tax year progresses rapidly, the uncertainty surrounding the future of the exemptions can make you hesitant to make large gifts now to use up your “bonus exemption” before the legislation potentially sunsets at the end of the year. It’s not easy to make large gifts, reduce your cash flow, and adjust your lifestyle to avoid an uncertain outcome. The good news is that you have options to build in flexibility, allowing you to prepare for uncertainty without making drastic changes now. This means you can take advantage of the “use it or lose it” opportunities while still retaining the ability to adapt your plans as more clarity emerges.

• Consider having trust documents drafted by your attorney now but not funding until you have more clarity: Ensure you are not left waiting in line as attorneys and advisors get busier as the end of 2025 approaches. It is important to have everything prepared for when you are ready to make a decision. For example, you can have your attorney draft a dynasty trust agreement now but wait to fund the trust later in 2025 when there is more legislative clarity.
• Consider creating a revocable trust that is made irrevocable upon a specific triggering event: This technique may allow you to remove assets from your estate during life. For example, you fund a trust with your remaining $5 million of exemption, with a clause that makes the trust irrevocable if the TCJA sunsets on Dec. 31, 2025. This way, if the exemption amounts are reduced, the trust becomes irrevocable, and the assets are removed from your estate, utilizing the higher exemption amounts. If the exemption amounts are not reduced, the trust remains revocable, and you have not used your remaining $5M of exemption.
• Consider making incomplete gifts: Transferring assets with the option to revoke the transfer until a predetermined date allows you to wait for legislative clarity. For instance, you could transfer $5 million worth of assets to an irrevocable trust with a provision that allows you to revoke the transfer until Dec. 31, 2025. This gives you the flexibility to decide whether to finalize the gift based on the legislative outcome.
• Consider selling assets to an intentionally defective grantor trust (IDGT): Sell assets to an IDGT with the flexibility to convert the sale to a gift by forgiving the promissory note. For example, you sell $5 million worth of assets to an IDGT in exchange for a promissory note. If the exemption amounts are reduced, you can forgive the note later in 2025, converting the sale into a gift and utilizing the higher exemption amount before it decreases. If the exemption amounts are not reduced, the IDGT transaction will remain a strategic technique to remove appreciation out of your estate over time.
• Consider creating a lifetime qualified terminable interest property (QTIP) trust: You can fund a trust now for your spouse’s benefit but have until Oct. 15, 2026 (the extended due date of your 2025 gift tax return) to determine whether you want to use your exemption or not. For example, you fund a QTIP trust with $5 million, you can elect to have the trust assets included in your spouse’s estate, which would cause the gift to be eligible for the gift tax marital deduction, preserving your exemption. Alternatively, you could choose to have those assets not be eligible for the marital deduction and utilize your exemption to remove the assets from you and your spouse’s estate.
• Consider rescinding a gift: This technique allows you to potentially undo a gift if legislative changes make it less advantageous. For example, you can make a gift now and later rescind the gift if desired. The recission should occur in the same tax year as when the original gift was made.

Plan for uncertainty today

The uncertain future of the exemptions, as well as the estate, gift and generation-skipping transfer taxes in general, make it challenging to plan with confidence. However, waiting and seeing could leave you unprepared and left waiting in line at the end of 2025. Taking proactive steps now to create a flexible and adaptable estate plan is essential. By doing so, you can ensure that you are better positioned to navigate any changes that may come.

This article was written by Carol Warley, Amber Waldman, Alexa Larson and originally appeared on 2025-03-18. Reprinted with permission from RSM US LLP.
© 2024 RSM US LLP. All rights reserved. https://rsmus.com/insights/services/business-tax/estate-planning-in-2025-what-you-can-do-now.html

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent assurance, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/about for more information regarding RSM US LLP and RSM International.