As we near the end of 2024 and the close of another election cycle, let’s review the status of some relevant laws:

Estate tax. For 2024, the lifetime estate tax exemption amount is $13.61 million per person. This amount will rise to $13.99 million in 2025. If someone’s estate is worth less than the lifetime estate tax exemption at death, they do not owe estate taxes. If someone’s estate is worth more than that at death, their estate owes tax at the rate of essentially 40% on the amount over the lifetime estate tax exemption amount.

In 2026, under current law, the lifetime estate tax exemption amount is scheduled to decrease to about $7.2 million per person. However, with the Republicans in control of both houses of Congress (though narrowly) and the presidency, there is a decent chance they will look to keep the lifetime estate tax exemption at $14 million or more for 2026 and thereafter.

It is important to note that if a person is married at death and leaves all their assets to their spouse, no estate tax is due. The living spouse can elect portability to add on the lifetime estate tax exemption amount of their deceased spouse to their own. In other words, a married couple can be worth just about $28 million in 2025 before they have to be worried about estate tax if they were to both die.

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Annual exclusion. Gifting goes hand in hand with the estate tax. The annual exclusion amount in 2024 is $18,000 per donor per donee. Depending on inflation, this amount rises by $1,000 every so often. In fact, in 2025, the annual exclusion amount is increasing to $19,000 per donor per donee. We have had some high inflation over the last few years, as the annual exclusion was $17,000 in 2023; $16,000 in 2022; and $15,000 for the four years before that.

If you are still with me, you might be thinking: Why can’t a person who might be over the estate tax at death give away some of their assets prior to death? Well, let’s say Dad gives $1,019,000 of assets to his son in 2025. With some minor exceptions, this gift is tax-free to father and son.

However, Dad must file a gift tax return, because if this is the only gift he has ever made that exceeded the annual exclusion amount, now if he dies in 2025, he can only be worth $12.99 million to avoid the estate tax. The first $19,000 of the gift to his son is sort of a freebie, but since he exceeded that freebie by $1 million to his son, his lifetime estate tax exemption amount is reduced by that $1 million.

It should be noted that Dad can gift up to $19,000 in 2025 to as many people as he wants and none of those donees will owe tax, and it will not reduce Dad’s lifetime estate tax exemption amount.

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Corporate Transparency Act. Hopefully, you are tired of hearing about the Corporate Transparency Act and the required filing of the Beneficial Ownership Interest report. Back in March, a court ruled the law unconstitutional, but that only applied to the plaintiffs in that action, though the case is under appeal. If you have a limited liability company, limited liability partnership, limited partnership, corporation or certain kinds of trusts in certain states (not Wisconsin) and you had less than $5 million of gross income and less than 20 full-time employees in 2023, you need to file. So, if you have not filed, file or you run the risk of facing penalties.

Medicaid planning. For those of you (and I’m sure that’s most of you) who are not worried about paying estate taxes, you may be concerned about paying for the nursing home. Those laws remain generally unchanged. Depending on your age and the assets you own, it can still make sense to transfer your assets to your children, whether outright or via a special kind of trust, and after five years, those assets you gave away would not have to be used to pay for your long-term care. This kind of planning requires special care and the advice of a knowledgeable attorney.

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