Trump’s Return to the White House – A Sunset or Sunrise on Tax Law Changes?

With the sunset of the Tax Cuts and Jobs Act of 2017 (TCJA) on the horizon, the 2024 election held great uncertainty for individuals and their advisors with regard to tax planning. As election season has come to a close, and the scheduled tax law sunsets draw closer, individuals and their advisors now have a slightly clearer picture to help decide what estate planning strategies to employ in the coming months. Because the ultimate fate of the TCJA, and the tax provisions thereunder, depend on the action of lawmakers and the many, and sometimes competing, considerations involved in law-making, what has not changed post-election, is the need to continue monitoring related legal developments and to begin the process now of assessing what is best for your estate plan and wealth transfer goals.

Unless Congress takes action before the TCJA sunset occurs, effective as of midnight on December 31, 2025, the federal estate and gift tax exemption amount will decrease from approximately $14 million per person (or $28 million per married couple) to approximately $7 million per person (or $14 million per married couple).¹ That reduction represents about $14 million of assets that until December 31, 2025, can be gifted to the next generation (or any intended recipient) free of federal estate and gift tax, but in a little more than a year, may be subject to such tax (at a 40% tax rate).² Consequently, for individuals with assets in excess of the current federal exemption amount, using the entirety of the federal exemption before the December 2025 sunset could significantly lower their future estate and gift tax bill and may be advisable.

Although Former President Donald J. Trump’s return to the White House does not guarantee that the sunset will not occur, his return and the election outcomes in the House and the Senate can be useful data points for clients and their planners. Throughout his campaign, Former President Trump called for raising tariffs, adopting tax breaks for tips and overtime pay, and extending, or even making permanent, the TCJA. Notably, Former President Trump has supported making the estate tax changes under the TCJA permanent, which would bring to an end the recurring threat of sunsetting and ensure the current federal exemption amount remains. Still, without action from Congress, the current available federal exemption will be cut in half beginning on January 1, 2026. Although the Republicans taking the majority in the Senate and the House may increase the likelihood of extending provisions under the TCJA, it may be late into 2025, or even early 2026, before there is any certainty. (It was not until January 2, 2013 that the American Taxpayer Relief Act of 2012 was signed into law, extending the increased estate tax exemption set by the Bush administration that expired on December 31, 2012.)

For those with a potential federal estate tax liability under current law, the trouble with a “wait-and-see” approach through 2025 is that it runs a significant wealth-preservation risk—loss of the $14 million additional exemption for married couples or $7 million for individuals that is available today.

To mitigate that risk, and to avoid any hurried planning or unavailability of attorneys or other advisors towards the end of 2025, clients seeking to maintain flexibility as the sunset deadline approaches may wish to consider getting their planning and any necessary documents ready now, and then waiting to make transfers of property until closer to the end of 2025, when the fate of the TCJA and its sunset may be more certain. Whether the election results ultimately usher in a sunset, or sunrise, of the TCJA estate tax exemptions, clients would be best served to meet with their advisors today to put together a game plan.