End-of-Year Estate Planning Tips: What to Know for 2025
Estate Planning Services in Woodinville, WA
As 2024 draws to a close, we encourage our clients and readers to assess their estate plans, especially those with complex estates. This annual review is not just about fine-tuning asset distribution but also about staying updated on legal changes that could impact your estate planning strategies for the upcoming year. With new laws potentially affecting tax thresholds and estate planning rules in 2025, now is the perfect time to ensure your estate plan remains robust, tax-efficient, and aligned with your goals. Here are some key considerations and updates to keep in mind for end-of-year estate planning.
1. Be Prepared for Possible Changes in Federal Estate Tax Exemption
The federal estate tax exemption, which is currently set at $12.92 million per individual for 2024, is expected to revert to approximately $6 million per individual starting in 2026 due to the sunset provisions of the Tax Cuts and Jobs Act (TCJA). Although the change isn't until 2026, proactive planning can help you stay ahead. High-net-worth individuals may consider making lifetime gifts to reduce their taxable estate before the exemption potentially decreases. Using gifting strategies now could help shield significant portions of your estate from future taxes. We encourage you to schedule a consultation with us to discuss your personal circumstances before making any significant changes to your estate plan.
2. Address Washington State's Estate Tax Implications
Washington State has one of the lowest estate tax exemption thresholds in the country, currently at $2.193 million. If your estate exceeds this amount, it may be subject to state estate taxes, with rates ranging from 10% to 20%. Given this lower threshold compared to federal levels, high-net-worth individuals and families in Washington should prioritize strategies to mitigate state tax liabilities. Techniques such as
creating trusts,
making charitable contributions, and
utilizing family limited partnerships (FLPs)
…can be effective in reducing the taxable estate and preserving wealth for the next generation.
3. Review and Update Your Trust Structures
With potential changes in tax laws on the horizon, reviewing the structure and funding of your trusts is essential. Irrevocable trusts, grantor retained annuity trusts (GRATs), and charitable remainder trusts (CRTs) can be particularly useful for tax mitigation. However, the rules governing these trusts may be adjusted as part of broader tax reforms in the coming years. Ensuring that assets are properly titled in the name of the trusts and confirming that trust documents reflect your current wishes can help prevent complications down the road.
4. Leverage Year-End Charitable Giving for Maximum Benefit
For those with philanthropic goals, year-end charitable giving is not only a way to support causes you care about but also a strategic tax-saving tool. Donating highly appreciated assets to charities or setting up a donor-advised fund can help avoid capital gains taxes while still providing a valuable income tax deduction. With tax changes potentially affecting the deductibility of charitable contributions, acting before year-end could maximize the benefits of your giving strategies. This approach not only minimizes taxes but also aligns your legacy with your values.
5. Plan for Potential Shifts in Capital Gains Tax Rates
It’s smart to be prepared for a capital gains tax rate for high earners. If such legislation were to pass, selling appreciated assets before the end of the year could help lock in at the lower tax rate. As you review your estate, consider whether selling or gifting certain assets now could reduce the overall tax burden on your estate. Our attorneys have advanced training in tax laws surrounding estate planning and provide our clients with appropriate legal guidance.
Proactive end-of-year planning is necessary to ensure your wealth is preserved and transferred according to your wishes. Legal changes and evolving tax laws can significantly impact the effectiveness of your estate plan, making it essential to stay informed.
By addressing these updates and considering strategic adjustments now, you can optimize your estate plan for 2025 and beyond, giving you peace of mind and confidence in your family's financial future. Schedule your complimentary consultation with us today to get started.
The information provided in this blog is for general informational purposes only and is not intended as legal advice. Reading this blog does not create an attorney-client relationship. For advice regarding your specific legal situation, please consult a qualified attorney. The law is subject to change, and the accuracy of the information may vary over time.