Monument Resource Center
Our clients hire us because they recognize the value of our Team’s unique, straight-forward, unfiltered opinion and our tailored advice designed to answer their questions, not everyone else’s. Below, you’ll find some of the most important questions we have been asked over the years to help you better understand the role we play and the advice we give.
Did you panic in 2021 when Congress was discussing lowering the federal estate tax exemption amount? Did you ask yourself, “Should I be doing something?”
Congress ultimately nixed any changes to estate tax laws as part of the Build Back Better (BBB) negotiations. Great, no one needs to rush into any decisions.
BUT the federal estate tax exemption is still going to be cut in half in 2026, which begs the question again: Should you be doing something?
[Estate Planning Sidebar: Right now, the federal estate tax exemption—the amount of your gross estate at death not subject to federal estate tax—is at an all-time high. In 2022, it’s $12.06M for individuals and $24.12M for married couples. The Tax Cuts and Jobs Act (TCJA) of 2017 doubled the federal estate tax exemption, but only for a limited number of years. After 2025, the exemption amount will “sunset” (a fancy way of saying “end”) back to the pre-TCJA levels: $5.49M for individuals and $10.98M for married couples (to be adjusted for inflation). Unlike the possible changes discussed during BBB negotiations, this date is not a guess—it’s a certainty.]
Yes, an actual change in 2026 is a lot better for planning purposes than a hypothetical change in the immediate future. But this isn’t a “tomorrow problem” for two reasons:
- Thoughtfully crafting your estate plan takes time. Why would you want to put together your estate plan in a mad down-to-the-last-minute dash? Wouldn’t you rather carefully consider your options at your own pace? Use the benefit of time to consider methods for lowering your gross estate (if estate tax is going to be an issue for you) in conjunction with your trust and estate attorney and wealth management team. 2026 will be here before you know it.
- Assets that are growing can heighten your estate problems. If your gross estate is looking like it will owe estate taxes, why wouldn’t you want to get appreciation of significant growth assets (like a business or high-performing stock) out of your estate sooner rather than later? It may make sense to transfer assets that are going to grow out of your estate now to avoid compounding gifting and estate tax issues later on.
Should You Be Doing Something?
Let’s do a magazine-style quiz (because I’m trying to make estate planning as much fun as possible).
If you answered “no”—and assuming you don’t own any specific assets (like a business or stock options) that are going to experience such significant growth in the future that you would be near these levels—then your course of action is one of my favorites: do nothing. You aren’t going to have a federal estate tax problem when the exemption sunsets. Don’t leap to options that would unnecessarily limit your control of and access to all your assets. Keep an eye on your net worth in case Congress discusses lowering the exemption amount further in the future, but otherwise you are in “sit tight” mode. (Obviously this doesn’t negate keeping your core estate documents up to date… more on this below.)
If you answered “yes,” meaning your gross estate is near or above the post-sunset exemption amounts, then you should definitely reach out to your trust and estate attorney and wealth management team. You need to be considering your options. And there are many, including:
- Gifting significant assets—to family and friends, and/or an irrevocable trust that you don’t have control of or access to—while the exemption amount is higher (there is no claw-back if your total lifetime gifts through 2025 exceed the lower exemption amounts in 2026)
- Purchasing a permanent life insurance policy to pay estate taxes (which will be less expensive the younger you get the policy)
- Making significant contributions to charity or a donor advised fund during life or at death (perhaps the simplest plan to avoid estate taxes is to say “at my death, everything above the exemption amount goes to charity, and my heirs get the rest”)
- Just planning for your estate to pay estate taxes, whatever the exemption amount may be at your death
If you answered “no,” skip to #3.
If you answered “yes,” reach out to your trust and estate attorney and wealth management team. While these assets may be a modest value now, a significant sale that dramatically increases your net worth could create an estate tax problem where there previously was none. You can take steps now to transfer these assets—and, more importantly, their subsequent growth—out of your estate so they will not be subject to estate tax. If you’re calling up your attorney when you have a deal on the table, it’s too late—the opportunity has passed.
If you answered “no,” skip to #4.
If you answered “yes,” are they prepared to inherit significant wealth? Do protections need to be put into place to help them successfully manage this wealth? Your trust and estate attorney may need to create legal guidelines for your heirs that are unique to their life stage and circumstances. And your wealth management team can help guide a long-term conversation to prepare your heirs to inherit wealth.
If you answered “no,” skip to the next section!
If you answered “yes,” then you need to update your documents. And if you’ve never had core estate documents, it’s time to write them. These documents are a baseline you should have, regardless of your level of wealth. And if you have minor children, then put this task in bold, double-underlined at the top of your to-do list for one specific reason: guardianship. If something were to happen to both parents, you want to decide what will happen to your kids rather than leave it to the courts. Also, make sure the people named to take over guardianship are still up to the task. No excuses, get this done.
What To Do Before the Sunset
When crafting your estate plan, there are a lot of considerations, among them:
- The exemption dollar amount changes over time
- Future growth and appreciation of your assets
- Not giving away so much that you don’t have enough to live on and meet your other goals
- Being strategic in determining who transfers what assets what so that you preserve as much exemption as possible after the sunset
The point is: you need to plan. If you avoid the planning, then you are agreeing that your plan is to possibly give money to Uncle Sam in the form of estate taxes—which is a perfectly fine plan, just do that intentionally.
And (yup, I’m going to say it again) you need to do this planning NOW. But you don’t need to figure out all the answers alone! Need help with this planning? Want to talk through your options? Need a referral to a trust and estate attorney? Call us. Monument can help.
It’s time to find clarity around your finances and remove the anxiety of the unknown.
Read our case study, “High Earners Eye Retirement,” to see how we helped one of our clients plan for the long term.
Ready for straightforward, unfiltered opinion and tailored advice for YOUR questions, not everyone else’s?
Recent “Off the Wall” Blog Posts
By Erin M. Hay, CFA
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