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1. New Tax Law and Estate Planning Shifts

• The federal estate tax exemption has risen to $15 million per person ($30 million per couple) starting in 2025, adjusted for inflation thereafter.
  Fact check: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

• For many clients, this change eliminates federal estate tax exposure, shifting the focus from estate tax minimization toward income tax planning, asset protection, and family legacy goals.

• State estate taxes still apply in certain jurisdictions (e.g., Washington, New York, Massachusetts), requiring continued planning.
  Fact check: https://taxfoundation.org/state-estate-tax-inheritance-tax-2024/

2. Trust Structures – Reassessing the Need

Irrevocable Life Insurance Trusts (ILITs):

• Originally designed to keep life insurance proceeds outside of taxable estates.

• With higher exemptions, some clients may reconsider paying premiums or may swap policies for more flexible assets.
  Fact check: https://www.irs.gov/faqs/estate-taxes/life-insurance

Qualified Personal Residence Trusts (QPRTs):

• Useful when exemptions were lower; now may be less attractive since assets in QPRTs do not receive a step-up in basis at death.
  Fact check: https://www.law.cornell.edu/cfr/text/26/25.2702-5

Spousal Lifetime Access Trusts (SLATs):

• Still valuable for asset protection and state-level estate tax planning, but may be repurposed to optimize income tax deductions (e.g., SALT cap benefits).

3. Income Tax Planning Opportunities

• With estate taxes less relevant for many, income tax strategies take center stage:

  • Using non-grantor trusts to maximize deductions (state and local taxes, charitable contributions).

  • Taking advantage of step-up in basis at death where possible.

  • Leveraging IRC §1202 Qualified Small Business Stock (QSBS) for capital gains exclusions.
    Fact check: https://www.irs.gov/affordable-care-act/questions-and-answers-on-section-1202-qualified-small-business-stock

• Connolly case impact: Life insurance held inside a company may increase its estate value; advisors should consider cross-purchase agreements instead of redemption agreements to optimize basis outcomes.
  Fact check: https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=13381

4. Business Succession and Buy-Sell Agreements

• Old planning often suppressed business valuations to reduce estate tax. Now, with high exemptions, clients may want higher valuations to secure a larger basis step-up.

• Buy-sell agreements should be revisited to ensure they reflect fair value and align with new income tax goals.
  Fact check: https://www.investopedia.com/terms/b/buy-and-sell-agreement.asp

5. Charitable Planning Adjustments

• Starting in 2026, all taxpayers will be able to deduct $1,000 (single) or $2,000 (married) for charitable contributions beyond the standard deduction.

• However, new rules phase out larger charitable deductions based on adjusted gross income. Advisors may recommend “bunching” gifts in 2025 (e.g., donor-advised funds) before limits tighten.
  Fact check: https://www.irs.gov/charities-non-profits/charitable-contributions

• Qualified Charitable Distributions (QCDs) from IRAs (age 70½+) remain a tax-efficient strategy.
  Fact check: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals

6. Community Property and Basis Considerations

• In community property states (e.g., CA, TX, AZ, NV, LA), both halves of marital property get a full step-up in basis at the first spouse’s death.
  Fact check: https://www.law.cornell.edu/uscode/text/26/1014

• Advisors should weigh creditor risks versus tax benefits, and consider joint trusts or tenancy-by-the-entirety–style planning for non-community property states.

7. Advisor Action Steps

1. Reevaluate ILITs, QPRTs, and SLATs – determine if they still serve client goals under the new exemption.

2. Shift from estate tax to income tax strategies – step-up in basis, QSBS, SALT deductions, non-grantor trust planning.

3. Review buy-sell agreements – optimize valuation for basis rather than suppression.

4. Plan charitable giving proactively – bunch gifts before 2026 rule changes, use QCDs for older clients.

5. Model scenarios – run multi-year projections, especially for high-growth clients who may exceed future thresholds.