5 Considerations for Personal Estate Planning in 2025

Adam J. Centner

Each new year offers a chance to step back, recalibrate, and plan for the year ahead. Individuals and businesses alike should take the time to ask and answer some simple questions to ensure their estate and business succession plans are in the strongest position possible as we begin 2025. Below are five considerations.

1. Federal estate tax: a sense of less urgency, but still uncertainty

The current federal gift, estate, and generation-skipping transfer tax exemption amount – the total amount that each U.S. citizen may transfer during life or at death free of any federal transfer tax – is $13.99 million per person, a slight increase from 2024. Under current law, the exemption amount is scheduled to reduce to approximately $7 million on Jan. 1, 2026, and for that reason, many of our clients have been considering gifting the full amount of the exemption prior to next January, as the IRS cannot claw back any excess used if and when the exemption amount ultimately reduces.

Because the reduction in 2026 is automatic absent new legislation, the reduction has at times seemed like a foregone conclusion in recent months. With Republicans now controlling both houses of Congress and soon the presidency, however, the general consensus is that the current exemption amount may be extended; in other words, it is now less likely, given the election, that the exemption amount will actually reduce in 2026. Still, while new legislation to extend the current exemption amount is expected, it is certainly not guaranteed, particularly with a slim Republican majority in the House, and you need only look to last month’s government funding fiasco to see how unpredictable a razor-thin House may be. Adding to that uncertainty, any extension that is passed will likely be funneled through budget reconciliation measures, meaning it will not be permanent, and the extension could be for as few as three or four years. For that reason, many of our high net worth clients are still moving forward with estate tax planning strategies

2. Annual exclusion amounts increase in 2025

Effective Jan. 1, 2025, the annual exclusion amount has increased from $18,000 per donor per donee to $19,000. The annual exclusion amount is the amount that an individual can gift to another individual without using any of his or her aforementioned lifetime exemption amount, and there is no limit on the number of individual donees. Married couples can split their gifts, allowing for a total of $38,000 in annual exclusion gifts to any number of beneficiaries in 2025. Grandma and Grandpa, for example, can gift $38,000 to all 10 of their grandchildren and transfer $380,000 in assets to another generation in a single year without utilizing any of their exemption amounts, or even reporting the gifts to the IRS (unless other, taxable gifts are made in that year).

Although annual exclusion gifts may seem inconsequential at times, consider that each gift of $19,000 will save a taxable estate $7,600 in estate tax at the donor’s death, not to mention the added growth on the gifted assets accumulating outside of the donor’s taxable estate. Over years, the estate tax savings from annual exclusion gifting can be significant.

3. Corporate Transparency Act reporting currently on hold

The Corporate Transparency Act, which initially required all reporting companies created prior to Jan. 1, 2024 to file a beneficial owner information report (a “BOIR”) by Dec. 31, 2024 (and any newly-created reporting company to file within 90 days), is currently on hold. As of the date of this writing, no entity is required to file a BOIR, although the Financial Crimes Enforcement Network is still accepting voluntary submissions. The next court date for review of the current stay is scheduled for late February. Business owners – even single-member LLC owners – should consult with their attorney to be sure they are in compliance with required reporting obligations.

4. Be honest and proactive about business succession planning

For family and other closely held businesses, business succession should always be a consideration and the new year is a great time to turn thoughts into action. At a minimum, business owners should be sure their interests will avoid probate and a clear transition plan is in place, whether during life or at death. Planning ahead will reduce turmoil and uncertainty and facilitate the growth and readiness of the next generation and will be helpful not only for the business and its members, but its customers as well.

5. Assess how the recent Connelly decision affects business succession planning

Business and estate planning attorneys are still assessing the fallout and modifying succession plans in light of the Supreme Court’s June decision in Connelly v. United States. In that case, the Court ruled that a company’s obligation to redeem a deceased shareholder under a stock redemption plan does not offset the company-owned life insurance proceeds when calculating the value of the company in the deceased owner’s estate. In other words, the life insurance proceeds were included in the value of the business, increasing the owner’s estate tax liability. Business owners should consider how their succession plan utilizes life insurance and discuss with their corporate and estate planning counsel whether updates are needed.

If I can be of any help to you or your clients on any estate planning matters, please call or email me.

Adam J. Centner
Partner
513.579.6488
acentner@kmklaw.com