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The Gift Tax Exemption Cut Is Coming

"Gift Tax" is shown written on a white notepad near a picture of a gift box and a fanned out stack of $100 bills. All this is on a yellow backdrop.

The federal estate and gift tax exemption may be halved soon unless Congress acts. Because it is unclear what will happen to the significant tax break, many wealthy individuals are being advised to make large transfers under the cap before 2026. In Arizona, acting before the deadline could lead to substantial tax savings and a larger legacy. Anything gifted beyond the exemption is typically subject to a 40% tax rate by the federal IRS.

How to get the most out of the tax break before it's gone

The gift tax exemption cut refers to a reduction in the amount of money an individual can gift to others without incurring gift tax. In 2017, the Tax Cuts and Jobs Act nearly doubled the gift and estate tax exemption to approximately $13.6 million per individual and $27.2 million per married couple.

However, this increase is temporary and set to expire in 2026. Following the sunset provision, the exemption is anticipated to return to around $6 million to $7 million per person and double for couples, adjusted for inflation.

Considerable gift tax savings are possible for just about any individual, but achieving these benefits requires careful planning and prompt action. An experienced Arizona estate planning lawyer can help.

Take advantage of the gift tax break before it expires

Capitalizing on the substantial gift tax exemption before the deadline means transferring assets efficiently and maximizing the benefits of the existing gift tax exemption before anything changes. Every situation is different. Some methods for taking advantage of the gift tax exemption will work for some people but not others. The best way to ensure you are getting the most out of this setting tax break is to consult an experienced Arizona estate planning attorney ASAP. An estate lawyer may be able to help you:

  • Make gifts to individuals. The new gift tax exemption will not start until Jan. 1, 2026. Gifts made beforehand benefit from the larger, untaxed wealth transfer conditions.
  • Make gifts to trust funds. This may help protect assets while still allowing the trust owner to control them.
  • Charitable donations. Making charitable gifts before 2026 allows wealthy individuals to reduce the size of their overall taxable estate.
  • 'Free' gifts. These are payments directly to a school to cover a family member's tuition or to a medical provider for health expenses that do not incur taxes. This type of gift does not count toward the lifetime gifting limit.

Don't wait until it's too late

Given the complexity of adjusting estate plans, particularly when trusts are involved, it's wise to start planning now to capitalize on the larger gift tax exemption before it expires in 2026. While two years may seem sufficient, the process entails extensive discussions with advisors and estate planning attorneys, along with meticulous document drafting.

Starting early allows individuals to navigate these complexities effectively, ensuring they get the most out of wealth transfers before the exemption potentially decreases. Delaying could result in rushed decisions or missed opportunities to leverage the current favorable tax laws, potentially leading to higher tax liabilities in the future.

Early planning allows you to make informed decisions and execute strategies that best suit your financial goals and circumstances. The Law Firm of Brown & Jensen can help you reach those goals.

We help you get the most out of tax exemptions

For most consumers, navigating tax matters alone is often daunting and risky. By partnering with a competent, seasoned, and trustworthy Arizona estate planning lawyer, you can confidently address your tax challenges.

For straightforward insights into your rights, available options, and how our skilled legal team can help you get the most out of the high gift tax exemption, contact us today. Schedule a free consultation today with an Arizona estate planning attorney committed to delivering results with precision and reliability. The Law Firm of Brown & Jensen has offices throughout Arizona, including Mesa, Tucson, Scottsdale, Chandler, Goodyear, Peoria, Show Low, and Payson. We are here to listen to your goals and help you achieve them.

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