Estate tax exemptions and the amounts for each exemption change annually. These changes could impact your overall estate plan and your financial goals. Check with your estate planning attorney to see how 2025’s changes affect your estate plan. There may be opportunities for you to improve your financial position with these changes.
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2025 Federal Estate Tax Exemptions at a Glance
- The annual exclusion gift tax amount increased to $19,000 per donee, per donor
- The generation-skipping transfer tax exemption increased to $13,990,000 per person
- Late election or portability for the unused federal estate tax exemption of a decedent remains five years after the decedent’s date of death
- The applicable age for starting the required minimum distributions of qualified retirement plan accounts is now 73, as long as the individual turned 72 after December 21, 2022
Increase of Federal Exemption Amounts to $13,990,000
The exemption from the generation-skipping transfer (GST) tax and the federal gift and estate tax exemption amounts have increased to $13,990,000 (from $13,610,000 in 2024). Married couples may combine their federal exemption amounts to transfer twice this, or totaling $27,980,000 for the couple.
Changes in Federal Estate Tax Portability
Portability is the ability of a widowed spouse to transfer the unused federal estate tax exemption of the deceased to themselves through filing a federal estate tax return. It remains in effect for 2025. The surviving spouse has up to five years from the date of their spouse’s death to file a late portability election. This election may be viable if the surviving spouse’s estate exceeds their available federal estate tax exemption amount. And, there is a pending decrease in the amount that will likely take effect in 2026, so it may behoove you to take this election this year if you qualify.
Federal Exemption Amounts Slated to End
The Tax Cuts and Jobs Act of 2017 extended these federal exemption amounts until the end of 2025. Unless Congress approves an extension in 2026, the base amount (adjusted for inflation) will return to $5,000,000. Given the significant difference between the current federal exemptions and the base, it may be in your best interest to act before the end of the year.
Increasing the Annual Exclusion Amount
The annual gift tax exclusion is the maximum amount one individual can gift another per calendar year without paying a gift tax. The donor can gift up to the maximum for unlimited recipients without using their other federal exclusion amounts.
The federal gift tax annual exclusion increased to $19,000 for 2025 and $38,000 per married couple. This applies to each donee from each donor. In 2024, the amounts were $18,000 and $36,000, respectively.
Tuition payments made directly to an educational institution on behalf of another and certain medical expenses paid directly to medical providers are excluded from being considered “gifts.” These payments are also exempt from the donee’s federal annual exclusions.
Federal Tax Rates for Estates and Trusts Remain the Same
The maximum GST tax rate and the federal estate tax rate remain unchanged at 40% for 2025. The maximum federal income tax rate for non-grantor trusts and estates is also unchanged at 37%. Federal tax rates apply to taxable income over $15,200 earned by an individual in 2025.
Changes in Required Minimum Distributions For Qualified Retirement Plans
Current federal law eliminated pre-death Required Minimum Distributions (RMDs) from Roth accounts in 403(b) and 401(k) plans; this began in 2024. You may be permitted catch-up” contributions, though. These rules have been adjusted for inflation, so it’s advisable to check to see if you are allowed to contribute an additional amount.
The applicable age for starting RMDs is now 73, but it will change to 75 in 2033 for people who turn 74 after December 31, 2032.
You may need to confirm your options for catch-up contributions, whether your RMDs must be paid out, and whether rollover options or Roth conversions may impact your retirement planning goals.
Applying Changes in Federal Estate Tax Exemptions To Your Estate Plan
Your estate planning attorney can help you understand how these changes impact your current plan and what opportunities you have to benefit from the changes. Contact your attorney today to discuss these changes.
Disclaimer: The information provided in the blogs on this website is for educational and reference purposes only and does not constitute legal advice. Every legal matter is unique, and the content here may not address your specific circumstances. We strongly encourage you to consult Chris and Krupa Downs Law to discuss your individual needs and receive tailored guidance. Contacting us through this website does not create an attorney-client relationship. Please seek professional legal advice before taking any action.
