By Geoff McDonald, VP, Senior Trust Officer, U.S.
In the United States, the 2017 Tax Cuts and Jobs Act (TCJA) significantly impacted estate planning, temporarily doubling the estate tax exemption to $10 million per individual, as adjusted for inflation. For 2025, the current Federal exemption is a historic $13.99 million, allowing married couples to transfer nearly $28 million to the next generation estate tax free. This increase has ultimately led to what many have called the “Golden Era” of estate planning.
However, all good things come to an end, right? At least that’s what many of us have been planning for over the best part of a decade…
Sunset planning
The TCJA’s increased exemption is temporary and was originally slated to sunset on December 31, 2025. Without a sweeping act from Congress, the exemption is set to revert to its pre-TCJA inflation-adjusted level in 2026. That 2026 exemption amount is expected to be around $7 million per individual.
The looming sunset of the current exemption has been a call to action for (ultra-)high-net-worth individuals to utilize this historic exemption opportunity while they can, by making completed gifts to irrevocable trusts. In a nutshell, the enhanced exemption amounts have allowed (U)HNW individuals to gift assets into irrevocable trusts up to the current exemption amount, with those gifts presumed to be grandfathered in if the exemption falls in the future. The timing and execution of many individual estate plans were largely driven by the exemption sunset, as well-advised individuals were encouraged to “use it before you lose it”.
Well, this sunset all of us trust and estate professionals have been preparing for may not be happening after all.
The One Big Beautiful Bill Act
In a move that sent shockwaves through the trust and estate planning industry, the “One Big Beautiful Bill Act” recently took a major step forward with the House approving the legislative package on May 22, 2025. The bill includes significant tax breaks that will inevitably reshape wealth transfer in America.
Ushering in a new “Golden Era” of estate planning, under the bill as currently drafted, the federal estate tax exemption would permanently increase to an unprecedented $15 million per individual (or $30 million for a married couple), with annual adjustments for inflation. That’s a drastic shift, one that will significantly reduce the number of families that will ever have federal estate tax concerns.
Rest assured – while the sunset may be off the table, all that post-TCJA pre-sunset planning was not necessarily done in vain. Similarly, regardless of whether the bill actually makes its way through the Senate, there are still many reasons to revisit your estate planning objectives and consider creating/funding an irrevocable trust.
“Don’t let the tax tail wag the dog”
It’s a phrase most of us in the trust and estate field have heard many times. If we’re being honest, many of us have probably used it in conversations with clients. While the mantra has been ubiquitous in estate planning for as long as we can remember, the underlying concept is just as relevant as ever.
Estate taxes are understandably a primary consideration when structuring an estate plan and considering transfers to irrevocable trusts. With the proposed $15 million exemption, most of us may never pay a penny in estate tax with or without an estate plan. However, while estate taxes are certainly a primary consideration when creating an estate plan (perhaps the most significant for some), there are many other components that should be considered. A proper estate plan can address several additional critical considerations, such as: intergenerational wealth planning, asset protection, potential state income/estate tax mitigation, charitable giving, business succession planning, and providing for and protecting loved ones.
Now is the time to touch base with a qualified attorney and/or financial advisor to revisit your estate plan to ensure it not only utilizes the expanded exemption, but also addresses these other critical components.
There remain many reasons to consider creating and funding an irrevocable trust today. And while you’re at it, why not consider doing so in one of the most favorable jurisdictions in the country? You have that choice, after all – irrevocable trusts do not have to be established in the same state in which you reside.
Speak to IQ-EQ
We’d be happy to discuss why it still makes sense to (i) create/fund irrevocable trusts now, and (ii) appoint a corporate trustee in a favorable jurisdiction like New Hampshire or South Dakota. At IQ-EQ, we can provide you with access to both jurisdictions through our offices in Rapid City, South Dakota and Bedford, New Hampshire.
When structured properly, New Hampshire and/or South Dakota may be able to provide the following benefits and structures for you, your family, and your irrevocable trusts:
- State income / capital gains savings
- Domestic asset protection trusts
- Trust modifications – nonjudicial settlement agreements (NJSAs), decanting etc.
- Directed/divided trusts
- Perpetual/dynasty trusts
- Trust advisors and trust protectors
- Purpose trusts
- Community property trusts (SD)
- Incomplete non-grantor trusts
- Spousal lifetime access trusts
- Beneficiary quiet/silent trusts
Ready to talk? Contact our expert team today.
To find out more about trust structuring options in the U.S. and other key jurisdictions worldwide, download our new essential guide to succession planning.
