
As we step into 2025, significant changes to tax laws could have a profound impact on your estate planning strategies. For individuals and families in Atlanta, GA, and Alpharetta, GA, staying ahead of these changes is crucial to protecting your legacy and minimizing tax liabilities. Here’s what you need to know and how to adapt your estate plan for the year ahead.
Key Tax Law Changes in 2025
- Sunset of the 2017 Tax Cuts and Jobs Act (TCJA) at the end of 2025
One of the most anticipated changes in 2025 is the expiration of key provisions from the TCJA.
The 2017 Tax Cuts and Jobs Act (TCJA) nearly doubled the lifetime estate and gift tax exemption from its previous levels. For 2025, the exemption stands at $13.99 million per person and 27.98 million for a married couples, meaning you can now give away almost $14,000,000 to your loved ones, without paying Federal gift or estate tax.
Families who are interested in passing on wealth should keep in mind that the lifetime estate and gift tax provisions in the TCJA are scheduled to sunset, or expire, at the end of 2025. “While it’s possible the 2017 tax cuts may be extended, families should consider reviewing their estate plans and taking action now, rather than waiting to see what happens with estate and gift tax laws, and, if necessary, take action now.”
2026 changes in U.S. tax laws, could mean significantly more estates could become subject to federal estate taxes, if the federal estate and gift tax exemption revert to pre-2018 levels, dropping from the current $13.99 million per individual (or $27.98 million for married couples) to ~ $7 million per individual in 2026 (adjusted for inflation).
- What this Means for You:
With the Federal gift and estate tax rate at 40%, a decreased exemption will be costly for many taxpayers.
With President-elect Trump heading back to the White House and Republicans set to control the Senate and the House of Representatives, the high exemption (and other tax law provisions enacted during President Trump’s first administration) may be extended beyond 2025. However, given the political unknowns and the tradeoffs that affect tax legislation, an extension of the high estate tax exemption is not certain.
Further, many assets, including investments in real estate, have relatively depressed current values. Therefore, we recommend that high net worth individuals act proactively to make gifts shielded by the high exemption under current law and make gifts as soon as possible so appreciation of the gifted assets is free of gift and estate tax. One effective gift tool for many high net worth individuals is a gift of assets expected to appreciate to an irrevocable trust whose beneficiaries are family members such as a spouse, children, grandchildren and future descendants. In addition to sheltering the gifted assets and their appreciation from future gift and estate taxes, the trust can provide creditor protection for generations to come.
Another basic estate planning tool (that has applied under tax law for many years and should continue without change) is to make gifts that do not count against the exemption: so-called annual exclusion gifts, which can be potentially made to an unlimited number of individuals but not more than $18,000 per individual in 2024 and $19,000 per individual in 2025. For those who have not yet made annual exclusion gifts in 2024, we recommend that you consider making them before 2025 and then consider making annual exclusion gifts in 2025 at the beginning of the year.
Proper planning can take time to implement and, unless the law changes, the high exemption is a “use it or lose it” deal. Therefore, if you wish to take advantage of an estate tax savings strategy through gifting, you should seek advice from an estate planning attorney as soon as possible to make sure your gifts are complete before the end of 2025.
- Required Minimum Distributions from Inherited Retirement Accounts
If you inherited a retirement account in 2020 or later, you may be subject to new required minimum distributions starting January 1, 2025.
If you are not the spouse, minor child, or less than 10 years younger than the deceased account owner, or if you are not disabled or chronically ill, you are required to withdraw the entire account within 10 years of the death of the account owner.
As of the beginning of 2025, a 10-year beneficiary must still withdraw the entire account within 10 years of the death of the deceased account owner. However, if the deceased account owner was required to take distributions annually, the 10-year beneficiary must also withdraw distributions annually. If the account owner was not required to take distributions annually, the annual withdrawal requirement will not apply, and the beneficiary may withdraw the account at intervals appropriate for the beneficiary, so long as is the entire account is withdrawn within 10 years.
The IRS will impose a penalty for failing to take a required annual distribution in 2025 or later, so beneficiaries of inherited retirement accounts should review their distributions and make sure the withdrawal requirements will be met.
- Potential State-Level Tax Implications
While Georgia does not currently impose a state estate or inheritance tax, federal changes may indirectly affect estate planning strategies for Georgia residents. It’s essential to consider how shifting federal thresholds could interact with other aspects of your financial plan.
How These Changes May Impact Your Estate Plan
Increased Estate Tax Exposure
Reduced federal estate tax exemption means that estates previously shielded from taxation could now face significant tax liabilities. For families in Atlanta and Alpharetta with substantial assets, this underscores the importance of reviewing and updating estate plans promptly.
Opportunities for Gifting Strategies
2025 presents a unique opportunity to leverage gifting strategies while the higher exemption is still in effect. Consider:
- Lifetime Gifts: Transferring assets to heirs now to utilize the current $13.99 million exemption.
- Irrevocable Trusts: Using trusts to move wealth out of your taxable estate while retaining control over asset distribution.
- Creating Credit Shelter Trusts: for married individuals. also known as a bypass or family trust, have long been a popular method of maximizing the federal estate tax exemptions for a married couple. When one spouse passes away, a portion of their assets is placed into a trust which passes to their beneficiaries on the death of the surviving spouse. The assets in the trust, and any appreciation of those assets, is “sheltered” from estate taxes at the death of the second spouse.
Reevaluating Charitable Giving Plans
Charitable giving can help reduce estate tax exposure. By donating to qualified organizations, you not only support causes you care about but also potentially lower the taxable value of your estate.
Business Succession Planning
For business owners in Georgia, the changes emphasize the need for robust succession planning. Consider strategies like family limited partnerships (FLPs) or grantor retained annuity trusts (GRATs) to transfer business interests tax-efficiently.
Steps to Take Now
- Schedule a Review of Your Estate Plan with an Atlanta Estate Planning Attorney
Given the impending changes, a comprehensive review of your estate plan is essential. Work with an experienced estate planning attorney at Hampton & Hampton LLP Alpharetta Estate Planning Attorneys in Alpharetta, GA to assess how your plan aligns with the new tax landscape.
- Implement Advanced Tax Planning Strategies
Strategies like irrevocable life insurance trusts (ILITs), charitable remainder trusts (CRTs), or dynasty trusts can help mitigate tax exposure while preserving wealth for future generations.
- Document and Update Beneficiary Designations
Ensure your beneficiary designations on retirement accounts, life insurance policies, and other assets reflect your current intentions and align with your overall estate plan.
Why Choose Us for Your Estate Planning Needs?
At Hampton & Hampton LLP, Alpharetta Estate Planning Attorney’s we specialize in crafting customized estate plans for individuals and families in Atlanta and Alpharetta, GA. Our team includes experienced Atlanta estate planning attorneys, Atlanta probate lawyers, and Alpharetta elder law attorneys who understand the unique needs of seniors and high-net-worth families. Whether you’re exploring living trusts, guardianships, or how to create a will in Georgia, we’re here to help.
We also provide tailored solutions for special needs trust planning, powers of attorney, and last will and testament preparation. As trusted wills and trusts lawyers in Atlanta, we work diligently to ensure your legacy is protected.
Contact Us Today
Don’t wait until it’s too late to adjust your estate plan. Schedule a consultation with our experienced estate planning attorneys at Hampton & Hampton LLP in Alpharetta. Whether you need assistance with probate, creating a will, or exploring living trusts, our team is ready to guide you. Let us help you navigate the complexities of the new tax laws and secure a brighter future for you and your loved ones.
FAQ
The federal estate tax exemption is set to revert to a lower threshold in January 2026, which could impact many individuals across the United States. As of 2024, the federal estate tax exemption is approximately $13.61 million per individual, or $27.22 million for a married couple, meaning estates valued below this amount are not subject to federal estate tax. However, unless Congress acts to extend the current law, the exemption is scheduled to drop to approximately $5 million per individual (adjusted for inflation) in 2026.
If you live in Georgia, the impact of this rollback depends on the value of your estate. If your estate exceeds the new exemption threshold, your estate may be subject to federal estate taxes. For example, if the exemption falls to $7 million and your estate is valued at $10 million, $3 million of your estate would be subject to federal estate tax, which would be taxed at a rate of 40%. The estate tax rate can range from 18% to 40%, depending on the value taxable amount of the estate; however if the taxable amount of the estate is more than $1 million, it will be taxed at the maximum rate of 40%.
It’s crucial to consider whether your estate might exceed the future exemption threshold. If so, you may want to consult with a financial advisor or estate planning attorney to explore strategies to minimize the potential tax burden. These strategies could include gifting assets during your lifetime, establishing trusts, or other tax-efficient planning methods.
Georgia does not have a state-level estate tax. Georgia also has no inheritance tax. Inheritance tax is imposed by some states on the beneficiaries who receive assets from a deceased person’s estate. The tax rate and exemption amounts vary by state and the beneficiary’s relationship to the deceased.
Fortunately, Georgia residents do not need to worry about an inheritance tax. This means that if you inherit assets from someone who lived in Georgia, you will not owe any state-level inheritance tax on those assets. However, it’s important to note that the absence of an estate tax or inheritance tax in Georgia does not exempt you from federal estate taxes or any inheritance taxes that might be imposed by other states if you inherit from someone who lived outside of Georgia.
While Georgia does not impose an inheritance tax or an estate tax at the state level, there are still potential tax implications for heirs. First, as mentioned earlier, there is no state inheritance tax, so your heirs will not owe any state tax on the inheritance they receive from your estate.
However, if your estate is subject to federal estate taxes (which would occur if the estate’s value exceeds the federal exemption threshold), the estate itself is responsible for paying those taxes before any distribution to heirs. This means that your heirs would receive their inheritance after the estate taxes have been paid. The beneficiaries themselves do not directly pay federal estate tax, but the amount they receive could be reduced if the estate is subject to significant taxes.
Additionally, while the inheritance itself is not taxable income for federal tax purposes, any income generated from the inherited assets (such as dividends from stocks, interest from bonds, or rental income from real estate) would be subject to income tax. Therefore, your heirs may need to pay taxes on any income produced by their inherited assets in the years following their inheritance. Finally, if your estate includes an IRA, 401(k), or other funds comprised of pre-tax contributions, it is vital that these accounts be handled correctly in your estate plan to avoid subjecting your heirs to unnecessary and potentially burdensome taxes.