Prepare large estates for TCJA sunset now

CPA financial planners need to talk with high-net-worth clients now about the idea of shifting ownership of millions of dollars in assets before the estate and gift tax basic exclusion is essentially cut in half on Jan. 1, 2026, Bob Keebler, CPA/PFS, said in an AICPA Personal Financial Planning (PFP) Section webcast.

“We are in a true use-it-or-lose-it situation” because of the upcoming expiration of the temporarily doubled exclusion, and it is important to communicate with clients now, he explained in his webcast “Planning With SLATs and SLANTs Ahead of the TCJA Sunset” (available exclusively to PFP Section members) earlier this year.

Although some clients may be hoping Congress will step in and extend the doubled exclusion, Keebler thinks the odds of lawmakers reaching a compromise on this issue are slim. Any deal in Congress likely would not be reached until the end of 2025, he suggested.

“What that means is, we can’t simply sit by and wait to see what happens, because your clients will not know if a compromise occurs until it’s too late to prepare psychologically” to transfer a major portion of their assets. Nor will they have time to retain a top-quality lawyer to help them set up trusts to receive the assets before attorneys are swamped with similar work from other clients, Keebler said in his webcast.  

Some clients will choose to hold off on transferring assets until the fall of 2025 to see whether legislation is enacted to extend the increased exclusion. But being prepared means “we have to get our trust set up,” Keebler said.

The exclusion was essentially doubled by the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, and currently stands at $13,610,000 ($27,220,000 for married couples). On Jan. 1, 2026, the exclusion will revert to approximately $7 million ($14 million for couples).

Taxpayers who die with a taxable estate that, combined with certain past gifts, exceeds the amount of the exclusion may be required to pay federal estate tax at a rate as high as 40%.

Clients can save up to $5 million to $6 million of estate tax by using the doubled exclusion before it expires, Keebler noted. “For many clients, it’s basically $14 million times 40%.” Crucially, there is no clawback when individuals transfer assets before the sunset and die after the sunset, he noted.

Talk with clients now

Now is the time when CPA financial planners should talk with high-net-worth clients about the 2026 sunset, Keebler said. The financial planner should also put together a balance sheet and cash flows to understand the client’s financial picture and evaluate the effect of the temporarily doubled exclusion reverting to its previous lower level.

“There are no programs out there that you can just turn to,” he said. “You’re going to have to build your own spreadsheets and, on a client-by-client basis, analyze ‘How much can we afford to give away?'”

One important consideration is that transferring assets during one’s lifetime results in the recipient’s having a carryover basis, while holding the assets until death allows heirs a basis step-up. This difference may significantly influence clients’ decisions about whether to take advantage of the doubled exclusion, depending on their specific situation. The step-up opportunity will also be important in deciding which of a client’s assets should be transferred and which held on to, Keebler noted.

Many advisers are getting into trouble, Keebler said, “because they’re not telling their clients about carryover basis, and then the clients’ families come back and say, ‘Wait a minute, my mom wouldn’t have gifted away that property had she known'” that it meant forgoing a basis step-up.

Clients should be given ample time to make these major decisions about shifting ownership of millions in assets. “You can’t possibly come to me in November of 2025 and say, ‘Bob, I need you to give away $26 million,'” Keebler pointed out.

Listen also to the podcast episodes “The Why, What, and How Behind Legacy Planning for Your Clients” and “Using Legacy Letters to Help Clients Articulate Their Wishes.”

— Dave Strausfeld, J.D., is a JofA senior editor. To comment on this article or to suggest an idea for another article, contact him at David.Strausfeld@aicpa-cima.com.