Estate Planning Steps to Contemplate in 2025
One of the tasks for families and business owners to consider at the start of a new year is estate planning. Did any special events occur in 2024, making it necessary for your estate plan to be updated? Or has another year passed since you didn’t get to update an existing plan or even have an estate plan created? What about a succession plan? A recent article from Cincinnati Business Courier, “5 key considerations for personal estate planning in 2025: An attorney’s perspective,” examines steps to take in the new year.
What’s going to happen with the federal gift, estate and generation-skipping transfer tax exemptions? The exemption is currently $13.61 million and will increase to $13.99 million in January (indexed for inflation). The legislation creating these levels expires on January 1, 2026, but the future of the exemption remains uncertain. Many high-net-worth individuals and families are going forward with estate planning strategies to ensure that their estates are not hit with taxes in case the exemption is reduced.
Annual gift tax exclusion rises to $19,000 in 2025. The IRS recently announced an increase in the annual gift tax exclusion, which took place in January 2025, from $18,000 to $19,000. This is the amount any individual can gift to as many people as they wish without using up any of their lifetime exemptions. A married couple can make gifts of $38,000 to as many individuals as they want.
Grandparents who gift $38,000 to grandchildren and adult children can transfer a tidy sum to their descendants in a single year without using any of their own exemption amounts. Speak with your estate planning attorney about whether or not it makes sense to file a gift tax form with the IRS. There are instances where this is not required. However, it is helpful for future planning.
Deadline for the Corporate Transparency Act is approaching. Business owners should speak with their estate planning attorney about the Corporate Transparency Act to see if they need to file a beneficial owner information report. Any reporting company established before January 1, 2024, is required to file the initial beneficial owner information report before January 1, 2025. A reporting company created in 2024 has to file within 90 days of formation. Even single-member limited liability corporation (LLC) owners should check with their attorneys to ensure that they meet reporting obligations.
Family-owned and other closely held business organizations should consider the new year a time to start creating or updating a succession plan. The succession plan needs to align with the estate plan and serve two goals: avoiding probate and ensuring a seamless transition for employees and clients.
Will the recent Connelly decision impact your business succession plan? This high court decision centered on whether or not proceeds from a business owner’s life insurance should be included in the value of the business for estate tax purposes. The court ruled a company’s obligation to redeem a deceased shareholder under a stock redemption plan cannot be used to offset the insurance proceeds when calculating the value of the company as part of the owner’s estate. Business owners need to consider how their succession plan is structured, including life insurance, and discuss whether changes need to be made.
Reference: Cincinnati Business Courier (Dec. 3, 2024) “5 key considerations for personal estate planning in 2025: An attorney’s perspective”
