We’re halfway through 2025, and significant tax legislation is making its way through Congress. President Donald Trump’s signature bill that includes major tax cuts and budget proposals has passed the U.S. House of Representatives and is currently in the Senate for debate. 

Several provisions of the bill could affect estate planning, but we won’t know the full impact on Americans’ estate plans until the legislation is finalized. Here are some issues to watch: 

Permanently Higher Estate Tax Exemptions 

The Tax Cuts and Jobs Act of 2017 (TCJA) doubled the Basic Exclusion Amount (BEA) for tax years 2018 through 2025, and the BEA has increased each of those years due to inflation adjustments. The increased wealth transfer tax exemptions have allowed families to pass more of their wealth to their intended beneficiaries without incurring federal gift or estate taxes. In fact, because of these increased exemption amounts, most Americans are unlikely to ever pay any wealth transfer taxes at all. 

These increased exemptions are scheduled to sunset at the end of 2025 and revert to pre-2017 levels. However, the legislation making its way through Congress contains provisions to permanently increase the BEA to $15 million per person beginning in the 2026 tax year (an increase from the current $13.99 million BEA for 2025). The permanent exemption amounts will continue to be indexed for inflation. 

Possible Elimination of Inheritance Taxes 

U.S. Senator Kevin Cramer (R-ND) and U.S. Senate Majority Leader John Thune (R-SD) have introduced the Death Tax Repeal Act, legislation that would permanently repeal the federal estate tax and generation-skipping transfer taxes, reduce the federal gift tax rate from 40% to 35%, and retain the full step-up in basis that occurs when a beneficiary or heir inherits property. Proponents say that repealing estate taxes (sometimes called death taxes) and retaining the step-up feature will significantly benefit those with family-owned businesses and highly appreciated assets. 

Strategies Needed for Succession Planning Post-Connelly 

Business owners subject to buy-sell agreements have historically purchased life insurance that is used to buy out a deceased owner’s interest in a company. In the past, the life insurance proceeds upon the owner’s death were included in company assets when valued for estate tax purposes. However, the proceeds’ value was generally deemed to be partially or fully offset by the value of the company’s obligation to use those proceeds to purchase (redeem) the deceased owner’s interest. The U.S. Supreme Court’s 2024 verdict in what is known as the ‘Connelly case’ established that the life insurance proceeds will increase the estate tax value of the company without any corresponding reduction.  

Because of this ruling, a serious disconnect may occur between the buy-sell redemption price paid for a deceased owner’s interest in a company and the estate tax value of that same interest. Business owners must consider succession planning strategies to address Connelly, including replacing or restructuring life insurance policies and the related buy-sell agreements. 

Mid-Year Estate Planning Tasks to Complete 

Mid-year is a good time to take stock of your estate plan and determine if any adjustments need to be made. Here are the top estate planning tasks to do before year-end: 

1. Create or update your estate plan. If one of your goals this year was to finally start the estate planning process, now is a good time to schedule a consultation and review your situation with an estate attorney. If you already have a Will, Trust, and other estate planning mechanisms in place, it’s good practice to revisit them if it’s been more than three years since you updated them or if you’ve experienced significant life changes since your last update. Business owners will want to include succession planning in the conversation. 
2. Make gifts to others. If you were planning to gift assets to others, now is a good time to do so. Recent graduates, for example, will appreciate financial gifts as they prepare for their next phase. Under current law, you can gift up to $19,000 to each of any number of individual beneficiaries each year without needing to file a gift tax return. Consider charitable gifts that will allow you to create social capital that becomes part of your legacy, while also realizing very favorable tax treatment. 
3. Designate agents to act on your behalf. Be sure to have a completed Power of Attorney (POA) and an Advance Directive for Health Care so that others can help you if you become incapacitated. If you have an existing POA and Advance Directive, revisit them if it’s been three years or so since they were updated. Financial institutions often decline to honor old POAs.  
4. Update beneficiary designations and titles to assets. Make sure your beneficiary designations, titles, and deeds are up to date for assets you wish to pass outright. You don’t want the wrong parties, such as former spouses or stepchildren, to receive your assets instead of your intended recipients. You also want to ensure that you own your assets in the optimal manner. For example, if you want your Georgia house to pass automatically to your spouse when you die, the deed or other asset title document must state that you and your spouse hold the asset as joint tenants with rights of survivorship (JTWROS). If the deed does not contain the right language, then the surviving joint owner will not receive the deceased owner’s interest automatically. Instead, the deceased joint owner’s interest will become part of that owner’s probate estate.  

If you’re looking for an estate attorney in Metro Atlanta to help you with estate planning, the experienced team at Morgan & DiSalvo would be pleased to schedule a consultation with you to discuss your unique needs and concerns. Please call (678) 720-0750 or email info@morgandisalvo.com.