2025 Federal Estate Tax Update: What High Net-Worth Families Need to Know Before the Exemption Sunsets

Today, many in coastal Southern California are enjoying unprecedented levels of personal and

family wealth. It is increasingly common for individuals and families to own a high-value primary residence, as well as rental and vacation properties. On top of that, they may have substantial amounts of cash, investment, and retirement money. Perhaps some have been further blessed by an inheritance from a loved one. But as the adage goes, “More money, more problems.” One hot-button issue with higher net-worth individuals and families is the uncertainty surrounding the federal estate tax exemption.

The current federal estate tax exemption in 2025 is $13.99 million, and double ($27.98 million)

for married couples. For estates exceeding these thresholds, the federal estate tax can be up to 40%.

Importantly, the current exemption amounts are set to expire, or “sunset,” at the end of 2025,

potentially reverting to a lower amount (estimated to be around $7 million per individual, adjusted for inflation) in 2026.

A recent tax bill passed by the U.S. House of Representatives proposes to make the higher exemption amounts permanent and even increase them to $15 million for individuals and $30 million for married couples. However, this bill is still subject to further revisions and approvals.

Some states have their own estate or inheritance taxes at the state level. Notably, California does not have a state-level estate tax.

Key Considerations

● Estate Planning: Individuals with estates that may be affected by the estate tax should

consider reviewing and potentially updating their estate plans, especially in light of the

upcoming sunset provision.

● Gifting Strategies: Utilizing the annual gift tax exclusion ($19,000 per recipient in 2025)

and lifetime gift tax exemption can reduce potential estate tax liability.

● Professional Advice: Consulting with a financial advisor or estate planning attorney (such

as Nicolai Law Firm!) can help individuals navigate the complexities of estate tax laws

and develop appropriate planning strategies.

*** Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. It is likely considered advertising. ***