For my high net worth clients, I am especially thankful this year. The reason? They have a golden opportunity to take advantage of the higher estate and gift tax lifetime exemption for 2024. 

This is a significant financial planning moment, and one that could help preserve millions of dollars for future generations, charitable causes, and beyond.

In 2024, individuals and families can transfer up to $13,610,000 without incurring federal estate or gift taxes. That’s a huge amount of wealth that can be shifted out of estates, either through gifting to heirs or charitable contributions. 

However, this window won’t stay open forever. In fact, with an expected reduction in the exemption set for 2026, there’s a good chance that this amount will be cut in half. And for those with a high net worth, this reduction could create significant tax liabilities in the future.

That’s why knowing the facts can assist in deciding to take action now or not.

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What is the Estate and Gift Tax Lifetime Exemption?

Before we dive into what to do, let’s start with a quick refresher on what the estate and gift tax lifetime exemption is. This is the maximum amount you can give away during your lifetime or after your death without incurring federal estate or gift taxes. 

The IRS allows this amount to increase annually, adjusting for inflation. In 2024, this exemption sits at $13.61 million per individual. 

For married couples, it doubles, allowing them to transfer $27.22 million combined. It’s an incredible opportunity to plan and reduce the tax burden on your estate.

For my clients, many of whom have accumulated significant wealth over their careers, this exemption is a key tool in their financial planning strategy. Whether it’s transferring wealth to the next generation or giving to a favorite charity, these moves can be done tax-free, as long as they are within the exemption.

But here’s the catch: in 2026, under current law, the lifetime exemption is scheduled to drop back to approximately $6.8 million per person. This means if you haven’t made use of this higher limit by then, you might lose out on the chance to transfer large sums without triggering a hefty tax bill.

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Why is the 2024 Exemption a Big Deal?

I often tell clients that estate planning isn’t just about reducing taxes, it’s about preserving your legacy. When the lifetime exemption is higher, like it is in 2024 (potentially ending in 2025), it opens up opportunities to ensure your assets go where you want them to, with as little erosion from taxes as possible.

For example, let’s say you have a total estate worth $20 million. If you don’t take advantage of the current $13.61 million exemption and the limit drops to $6.8 million in 2026, the amount above that exemption will be subject to the estate tax, at a rate of up to 40%. 

Suddenly, what could have been transferred tax-free may be subject to millions of dollars in federal taxes.

That’s why, for many high net worth individuals, this is important to consider within your financial plan.

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Planning Opportunities: How to Take Advantage of the 2024 (potentially ending in 2025) Exemption

1. Accelerate Your Gifting Strategies Now

One of the best ways to maximize this higher exemption is by accelerating your gifting strategies. I often work with clients to create a gifting plan that shifts assets out of their estate early, which can help reduce future tax liabilities.

There are several approaches to consider:

• Irrevocable Trusts: Trusts, particularly irrevocable ones, are an effective way to protect wealth while still transferring assets to your beneficiaries. Once assets are placed in an irrevocable trust, they are no longer considered part of your estate. Plus, any appreciation on those assets stays within the trust, further reducing future estate taxes.
• Estate Freezing Techniques: Estate freezing involves transferring assets now, while freezing the value at today’s levels, so future appreciation doesn’t inflate the estate’s tax liability. This is especially useful for assets expected to grow substantially in value, like business interests or real estate.
• Direct Cash Gifts: Sometimes, the simplest approach is the best. Giving direct cash gifts to heirs or loved ones can help reduce your taxable estate immediately. Remember, you can give up to $18,000 per recipient annually without it counting toward your lifetime exemption. 

Estate and Gift Tax Lifetime Exemption example 1

For example, during estate planning conversations, let’s consider someone that has a large investment portfolio and some real estate holdings they intended to pass on to their children. With the exemption set to drop in 2026, we know we need to consider all the options and take the appropriate act. 

Together, we can discuss their situation and unique needs and I can provide unbiased information to assist in deciding how various trusts will impact their overall financial goals and plan. 

In addition, we can collaborate with a (your) attorney to set up a trust that meets your requirement and utilize the exemption to move a significant portion of your portfolio into the trust. This not only reduces the size of the estate but also ensures that future growth would benefit the beneficiaries (family, charity, and/or philanthropic causes) directly, without being subjected to additional taxes.

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2. Lock in Tax Advantages for Future Generations

The 2024 exemption also presents a unique opportunity to lock in tax advantages for future generations. Whether you want to pass along a family business, a large real estate portfolio, or other valuable assets, now is the time to consider your options.

By transferring these assets while the exemption is higher, you’re not just reducing your estate’s taxable value. You’re ensuring that your heirs receive the full benefit of those assets. 

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3. Philanthropic Giving and Charitable Contributions

Another way to take advantage of the 2024 exemption is through philanthropic giving. If charitable causes are important to you, this higher exemption offers the chance to fund a donor-advised fund or even set up a private foundation.

These charitable strategies not only help you give back to the community but also allow you to reduce your taxable estate while keeping control over how the funds are used. This is a meaningful way to leave a lasting impact.

For example, if you have always been passionate about supporting education. Using the 2024 exemption, an irrevocable trust, which allows you to donate a portion of your wealth to a charity while also receiving income from the trust for a set period. 

This gives you the opportunity to support causes you have an affinity for, all while reducing the taxable value of your estate.

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What’s Next? Preparing for Future Changes in 2026

As much as I love the opportunities available in 2024, it’s important to look ahead. The federal estate tax exemption is scheduled to drop by nearly half in 2026, potentially reverting to around $6.8 million per person.

This reduction could significantly increase estate taxes for those who don’t make a plan now. The future landscape of tax law is uncertain, but one thing is clear, this exemption window is here now.

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The Importance of Professional Guidance

Navigating estate and gift tax laws can feel overwhelming. It’s not something most people deal with regularly, which is why working with an experienced Certified Financial Planner (CFP®) is critical.

For my high net worth clients, I always recommend sitting down with your financial team, whether it’s an attorney, a tax professional, or an estate planner. Review your current estate plan. 

Make sure it reflects the most up-to-date strategies to take advantage of this unique window in 2024 (potentially ending in 2025).

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Don’t Let This Planning Opportunity Pass

The 2024 estate and gift tax lifetime exemption provides a rare opportunity to transfer significant wealth without incurring federal estate or gift taxes. With the limit set at $13.61 million per person, this is the time to review your estate planning strategies and make moves that will preserve your wealth for future generations, charities, or other causes close to your heart.

But with the expected reduction in 2026, don’t wait too long to act. Take advantage of this higher exemption now to protect your legacy and minimize future tax liabilities by understanding your options. 

Whether through trusts, gifting, or philanthropic giving, you have the tools to make the most of this historic exemption increase.

If you’re unsure where to start or how these changes affect your unique situation, consult with a financial planner. Together, we can ensure that you take full advantage of this opportunity while it lasts.