Navigating estate and inheritance taxes

Estate planning requires a clear understanding of both federal and state tax implications in 2025. These taxes can significantly impact how your assets are distributed to loved ones.

Federal Estate Tax:

• Good News: The federal estate tax exemption for 2025 is a generous $13.92 million for individuals and $27.84 million for married couples filing jointly. This means estates below these thresholds won't owe federal estate tax.
• Filing Requirements: If your estate exceeds the exemption, a federal estate tax return must be filed within nine months of your passing. Assets exceeding the limit are taxed at a rate of 40%.

• Exemption Update: The current high federal exemption amount is in place through the end of 2025, due to provisions from the 2017 Tax Cuts and Jobs Act. Unless extended by Congress, the exemption is set to drop significantly in 2026, potentially to around $7 million per person. If your estate could be affected by this change, we strongly recommend speaking with an estate planning attorney in 2025 to review your options.

State Taxes:

• Be Aware of State Variations: Some states have their own inheritance and estate taxes with varying rates and exemption thresholds. These can significantly impact your overall tax burden.
• Not an Exhaustive List: While some states like Connecticut, Hawaii, and Illinois have estate or inheritance taxes, this isn't a complete list.
• Stay Informed: To ensure you have the most recent information specific to your state, check your state's Department of Revenue website or consult with a tax professional.

Planning for the Future:

Estate and inheritance tax laws can be complex and change over time. By working with a qualified estate planning professional, you can create a plan that minimizes your tax burden and ensures your wishes are carried out smoothly for your beneficiaries.

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