For years, high-net-worth individuals have enjoyed an unprecedentedly high federal estate and gift tax exemption. This historically generous window, however, is set to close. On January 1, 2026, a significant tax change is scheduled to take effect, a moment estate planners are referring to as the “2026 Tax Cliff.”

This impending change, rooted in the “sunset” provision of the 2017 Tax Cuts and Jobs Act (TCJA), creates a critical, time-sensitive opportunity for families with significant assets. At LforLaw, we believe that understanding this deadline is the first step toward creating a robust strategy to protect your legacy.

The Tax Cuts and Jobs Act of 2017 nearly doubled the federal estate and gift tax exemption, making it one of the most impactful pieces of tax legislation for estate planning in decades. In 2025, this exemption stands at a generous $13.99 million per individual, or $27.98 million for a married couple.

However, this elevated exemption is not permanent. Under current law, it is scheduled to revert to its pre-2018 level, adjusted for inflation, on January 1, 2026. This would reduce the exemption by roughly half, to a projected $7 million per individual. For those whose estates are at or above this lower threshold, the difference between a 2025 transfer and a 2026 transfer could be millions of dollars in estate taxes.

Why This is a “Use It or Lose It” Moment

The core principle here is that the generous “bonus” exemption available in 2025 will be lost if you do not use it by the end of the year. The IRS has provided “anti-clawback” regulations, which are a crucial piece of good news. These regulations ensure that gifts made under the higher 2025 exemption will not be “clawed back” into your estate to be taxed later, even if the exemption drops in 2026. This creates a powerful incentive to act now.

Key Strategies to Consider in 2025

To take full advantage of the current exemption and lock in its tax benefits, consider these advanced estate planning strategies:

1. Making Substantial Lifetime Gifts: The most direct way to use the higher exemption is to make a large gift. By gifting assets that exceed the annual gift tax exclusion ($19,000 per person in 2025), you can use a portion of your lifetime exemption, effectively removing those assets and all their future appreciation from your taxable estate. This is a powerful tool to transfer wealth to heirs without incurring gift or estate taxes.
2. Establishing an Irrevocable Trust: For individuals who want to gift assets but retain some control or provide for a spouse, establishing an Irrevocable Trust is a popular choice. Once assets are placed in this type of trust, they are removed from your estate for tax purposes. This strategy is highly effective for transferring appreciating assets, as all future growth will occur outside of your estate.
3. Spousal Lifetime Access Trust (SLAT): A SLAT is a particularly compelling strategy for married couples. One spouse (the donor) creates a trust for the benefit of the other spouse (the beneficiary), funding it with their lifetime exemption. The beneficiary spouse can still receive distributions from the trust, providing a layer of access and financial security. The assets, including all future growth, are then permanently removed from both spouses’ taxable estates, offering a powerful way to use the higher exemption without completely losing access to the funds.
4. Reviewing and Updating Existing Estate Plans: Even if you have an estate plan, it is crucial to review it with an attorney. Plans created before 2018 may not be optimized for the current tax environment or the impending changes. Documents may need to be updated to take advantage of the portability of the exemption between spouses or to incorporate new gifting strategies.

Don’t Wait Until the Last Minute

The window to act is closing quickly. Implementing these strategies requires careful planning, asset valuation, and the drafting of complex legal documents. Waiting until late 2025 could result in rushed decisions or, worse, missing the deadline entirely.

At LforLaw, our attorneys are well-versed in the complexities of tax-efficient estate planning. We can help you evaluate your assets, understand your options, and execute a strategy that utilizes the current exemption to its fullest, ensuring your legacy is protected for generations to come.

Don’t let this opportunity slip away. Contact LforLaw today for a consultation to discuss how to secure your financial future before the 2026 Tax Cliff.