The current (2025) estate/gift tax exemption of $13,990,000 per person ($27,980,000 for a married couple) is scheduled to reduce by approximately half (to about $7,000,000 per person) on January 1, 2026, unless Congress enacts legislation to change this. While we now have a Republican administration which would like to prevent this reduction, doing so will require legislation to pass which is never a sure thing with Congress.
While the vast majority of taxpayers will still be exempt from estate tax even if exemption amounts are reduced, some taxpayers do have this amount of wealth and are interested in planning.
Unfortunately, the best way to use the extra estate tax exemption in case it disappears is to give away all $13,990,000, (or $27,980,000 for a married couple) or as close thereto as possible, during life. For married clients who feel that giving away $27,980,000 will leave them insufficient funds to live, there are still savings that can be achieved even if only one spouse gives away his or her $13,990,000.
While conventional wisdom is that Congress will not let the large exemptions expire, clients who do not want to take this chance cannot wait to act. If clients decide to wait until late in the year to make large gifts, many of the most effective estate planning techniques to utilize their estate/gift tax exemption likely will not be available. It will be too late to find competent professionals to facilitate gift transfers, the IRS website may be shut down for routine year-end "maintenance" preventing clients from obtaining EINs for entities, and it might take more time than clients anticipate to finalize asset transfers at their banks and brokerage houses.
There are ways to act now, while preserving flexibility in case the large exemptions are preserved, but these must be done well before the end of 2025. These techniques include (1) revocable transfers, (2) creating and funding assets in entities earlier in the year, (3) selling assets for a note and executing on note forgiveness, (4) Lifetime QTIP trusts, and (5) "back-end" SLATs.
If you would like to explore any of these techniques, please contact our office.
After a brief injunction, the reporting requirements below are again required for all qualifying businesses. Please see FinCen link below for the most recent updates.
Beginning in 2024, the Corporate Transparency Act requires most corporations, limited liability companies, and similar entities to file a “Beneficial Ownership Information” Report providing information about the company and its ultimate beneficial owners.
Companies established prior to 2024 must file a BOI Report by December 31, 2024. Companies established after 2023 must file a BOI report within 90 days of their formation.
In the report, your business owners will need to provide certain basic information about the company, such as address, EIN, trade name, and state of formation. In addition, the business must provide certain information regarding its “beneficial owners,” which include those who own or control at least 25% of the Company, and those who exercise “substantial control” over a company’s decision-making. Those with substantial control generally include senior officers such as Presidents, CEOs, CFOs, COOs, and general counsel.
BOI Reports can be e-filed at https://boiefiling.fincen.gov/.
If you are a beneficial owner of one or more companies, you can create a “FinCen ID” to help streamline the reporting process at https://fincenid.fincen.gov/.
The foregoing is only a brief explanation of BOI filing requirements. Please visit the websites above for a more thorough discussion of the requirements.
If you have any questions regarding your BOI Report or would like our assistance with preparing it, please contact us and we will look forward to assisting you.
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