As 2025 draws closer to an end, a major shift is on the horizon — and it could significantly affect how your estate is taxed. Unless Congress intervenes, the current federal estate tax exemption, which was temporarily doubled by the Tax Cuts and Jobs Act (TCJA) of 2017, is set to “sunset” on January 1, 2026. This means the exemption amount will be cut in half, returning to pre-2018 levels — adjusted for inflation.
If your estate or your family's wealth could be impacted by this change, now is the time to plan. At Generations Legal Group, we’re here to help you understand what’s at stake and how to protect the legacy you’ve worked so hard to build.
What Is the Estate Tax Sunset?
Currently, the federal estate tax exemption is approximately $13.99 million per individual in 2025 — or $27.98 million for a married couple. This means you can transfer up to that amount to your heirs free from federal estate taxes.
But starting January 1, 2026, unless new legislation is passed, that exemption will drop to about $7 million per person, or $14 million per married couple (adjusted for inflation). Any amount over the exemption will be taxed at a top federal rate of 40%.
For Arkansas families who own valuable real estate, successful businesses, or investment portfolios, this shift could mean the difference between a tax-free transfer of wealth and a hefty tax bill.
Who Should Be Concerned?
You might think the estate tax only affects the ultra-wealthy, but that’s quickly changing. Consider:
- Family farms or ranches that have appreciated significantly
- Real estate investments, including rental property portfolios
- Small business owners with succession plans
- Retirees with large IRAs, 401(k)s, or brokerage accounts
- People who’ve already used most of their current gift/estate exemption
If your total assets (including life insurance, which is often overlooked) might exceed $7 million for an individual or $14 million as a couple, you are at risk of triggering estate tax liabilities.
Strategies to Protect Your Estate
The good news? There are several strategies available to help families lock in today’s high exemption and avoid unnecessary taxes:
1. Use Lifetime Gifting Now
You can make large gifts during your lifetime — using today’s exemption before it disappears. Gifts made before 2026 won’t be “clawed back” even if the exemption decreases.
2. Irrevocable Trusts
These trusts move assets out of your estate permanently and can be structured to benefit children or grandchildren. Examples include:
- Spousal Lifetime Access Trusts (SLATs)
- Irrevocable Life Insurance Trusts (ILITs)
- Grantor Retained Annuity Trusts (GRATs)
3. Family Limited Partnerships (FLPs)
An FLP can help reduce the taxable value of your estate while keeping family-owned assets under centralized management.
4. Charitable Giving
Charitable trusts and donor-advised funds are powerful tools to reduce estate size while supporting causes that matter to you.
Time Is Running Out — Act Now
Estate planning is always important, but the window to take full advantage of the current law is closing fast. Waiting until late 2025 could limit your options or overwhelm professionals trying to manage last-minute planning.
At Generations Legal Group, we specialize in estate planning that preserves your assets, honors your legacy, and protects your family. Whether you need to revise an existing plan or create one from scratch, we can help you navigate these upcoming changes with clarity and confidence.
Ready to Talk?
If you're unsure whether these changes will affect you or your loved ones, now is the time to find out. Call Generations Legal Group today at (479) 601-4119 or schedule a consultation online to begin your personalized estate plan.
Your legacy deserves more than a wait-and-see approach.
H. Todd Whatley, CELA*, LLM Elder Law
Owner, Generations Legal Group and The Elder Law Coach
Email: Todd@GenerationsLegalGroup.com
479-601-4119
2701 SE J St., Suite 109, Bentonville, AR 72712
Podcast for Seniors and their families.
*As certified by the National Elder Law Foundation, an ABA-approved organization for certification.
