How to Navigate the Tax Cuts and Jobs Act of 2017 (TCJA) in 2025 Amongst Uncertainly

When the Tax Cuts and Jobs Act (TCJA) was enacted in 2017, it brought a lot of changes to the U.S. tax code. It modified deductions and tax credits and changed depreciation rules and corporate tax rates. The corporate tax rate was slashed from 35% to 21%, and the lifetime estate and gift tax exemption nearly doubled. Suffice it to say the TCJA impacted both individuals and businesses in multiple ways.   

Now, in 2025, many of the individual tax provisions from the TCJA are set to expire at the end of the year. This creates uncertainty, especially when it comes to the estate planning process.

Change can feel overwhelming when it affects your estate planning and taxes. But change is also the only constant in life as well as in finances. The most important thing that can help you sail through right now is to understand what’s changing and what you can do to protect your money in the meantime.

This article will break down the key TCJA provisions for estate planning and financial planning and what is at stake in 2025, so you can prepare for what lies ahead.

Changes to estate planning you can expect in 2025

Estate, gift, and Generation-Skipping Transfer (GST) tax exemption rates will switch back to 2018 levels

The provisions for estate, gift, and GST tax rules until now helped people transfer their wealth to their loved ones without facing federal transfer taxes. However, since these changes were temporary and are set to expire at the end of 2025, now is the time to take action. Let’s take a look at what exists as of 2025 under the TCJA:

• Lifetime estate and gift tax exemption: The TCJA doubled the federal lifetime estate and gift tax exemption. Before 2018, the exemption stood at $5 million per person, adjusted annually for inflation. Under TCJA, this exemption was doubled to $10 million per person, also adjusted for inflation. By 2025, due to inflation adjustments, the exemption amount has risen to $13.99 million per individual and $27.98 million for married couples. So, as an individual, you can transfer nearly $14 million during your lifetime or at death without triggering federal estate or gift tax. Any amount above this threshold is taxed at a flat 40% federal rate.

• GST tax exemption: The GST tax applies when assets are transferred to beneficiaries, such as grandchildren. This tax is not applied when the assets are transferred to the next generation, but rather to the one after that. So, if you transfer assets to your children, you will not owe GST tax. But if you transfer it to your grandchildren, you will have to pay for it. The TCJA doubled the GST tax exemption. In 2025, the GST tax exemption stands at $13.99 million per person, the same as the estate and gift tax exemption. However, just like the lifetime exemption, this increased GST tax exemption is scheduled to revert at the end of 2025 unless Congress extends the current provisions.

If the provisions are not extended, the lifetime exemption for estate, gift, and GST taxes will drop to approximately $7 million per person, accounting for inflation adjustments from the 2011 base amount of $5 million. This will account for a reduction of roughly 50% compared to the 2025 level. If you have a large estate, this reduction could increase your estate tax exposure by quite a margin, depending on the size of the estate.

When these provisions expire, a person who passes away in 2026 with an estate worth $13.99 million may have $7 million or more of their estate subject to taxation if they have not used the exemption before its sunset on December 31, 2025. At a 40% estate tax rate, this could result in over $2.8 million in federal estate taxes.

So, what can you do now to protect your estate from these taxes?

     1. Consider transferring assets today or at least by the end of this year

With the exemption at its highest than it is likely ever going to be in the near future, this year is your window to make tax-efficient wealth transfers. Here’s how:

You can start by utilizing the annual gift tax exclusion. This is one of the simplest and most effective ways to reduce your taxable estate gradually. The annual gift tax exclusion for 2025 is $19,000 per recipient. You can use up this limit without affecting your lifetime exemption. If you are married, you and your spouse can combine your exclusions and gift $38,000 per person. You can make these gifts out to your children, grandchildren, or even other members of the family.

The second thing to do is leverage the lifetime exemption. The lifetime gift and estate tax exemption of $13.99 million in 2025 allows you to make larger transfers without incurring federal gift tax. This is unified with the estate tax, so any portion of the exemption used for lifetime gifts will reduce the amount available at death. You can also use this to make large gifts to irrevocable trusts and move appreciating assets out of your estate while retaining more control.

     2. Consider loan forgiveness where appropriate

Another estate planning and financial planning strategy can be loan forgiveness. This can be a financial strategy while also allowing to bury the hatchet wherever possible.

How?

Say you lend your children or grandchildren money for college education. Or perhaps you helped a loved one purchase their house by contributing to the down payment. If you have made such loans to family members or even trusts, you can consider forgiving these outstanding loans.

When it comes to the Internal Revenue Service (IRS), loan forgiveness is treated as a gift. So, you may use this strategy to reduce your lifetime exemption. If you take this up on priority in 2025, you can make use of the enhanced exemption before it is gone.

     3. Use a Credit Shelter Trust (CST)

A CST is a type of family trust. You may have heard of it by the name of bypass trust. It is generally used by married couples to maximize their federal estate tax exemption. A CST essentially allows a couple to lock in the estate tax exemption amount available at the time of the first spouse’s death.

Let’s consider the example of Susan and Ben, a married couple, to understand how this works:

In an unfortunate twist of fate, Susan passes away. When this happens, a portion of the estate, up to the amount of the couple’s unused federal exemption, is transferred into the CST. The assets that are now in the CST and any future growth on them will not be included in the surviving spouse’s (in this case, Ben’s) taxable estate upon their death. The trust can help preserve Susan’s estate tax exemption and shield that portion of the estate from taxation when Ben dies.

However, while offering tax benefits, you need to exercise some caution when using a CST. A CST only offers a single step-up in basis.

What does that mean for you and your heirs?

Simply put, the assets placed in the trust get their cost basis adjusted only once when the first spouse passes away. That’s it. If the assets continue to grow in value before being passed down to your beneficiaries, there is no other step-up when the surviving spouse dies. The result? Your heirs could end up paying more in capital gains taxes if the assets have significantly appreciated.

     4. Consider gifting strategies

The good news is that there are several trust-related gifting strategies that you can consider in light of the potential changes being made to the TCJA, including the following:

• Gifts to dynasty trusts: Dynasty trusts are a type of long-term trust. They help you transfer your wealth across multiple generations without incurring estate or GST taxes at each generational level. These trusts can be set for several decades at a time and can last generations. You can gift your assets to a dynasty trust and benefit from the current exemption. This can help you move wealth from your taxable estate.

• Gifts to Spousal Lifetime Access Trusts (SLATs): A SLAT can be a suitable choice for married high-net-worth couples. With a SLAT, one spouse can gift assets of up to $13.99 million in 2025 using the full lifetime gift tax exemption and put them in a trust set up for the other spouse. The beneficiary spouse can then access these assets. What this does is offer the couple indirect benefits from the funds during their lifetime. However, the couple must stay married. SLATs can help you move assets out of your taxable estate, which lowers your estate tax down the road. Additionally, they allow your spouse to use them if needed. And, when the beneficiary spouse passes, the remaining assets typically pass on to your children or grandchildren. One thing to keep in mind is that while assets passed directly from one spouse to another are usually estate-tax-free, the surviving spouse’s estate could still be taxable if it exceeds the exemption in place at the time.

• Gifts to new Intentionally Defective Grantor Trusts (IDGTs): An IDGT is an irrevocable trust that lets you remove your assets from your estate while retaining control over them. You can transfer your assets into an irrevocable trust. After which, these assets are no longer part of your estate for estate tax purposes, which helps reduce your potential tax burden. But you, as the grantor, are still responsible for paying income taxes on the trust’s earnings. That may not sound like a perk, but it is as it allows the trust’s assets to grow without income tax payments. So, the wealth creation within the trust compounds for your beneficiaries tax-free.
  
  You can consider selling your assets to IDGT in exchange for a promissory note. This works like a loan with a term of approximately 10 to 15 years. The trust repays you with interest, but any growth in the assets beyond the interest rate stays inside the trust and out of your estate. So, while you get paid back, your estate reduces, which helps you leave more assets for your heirs. If you are looking to lock in today’s historically high gift tax exemption before it potentially drops in 2026, setting up an IDGT is something you can consider n

     5. Evaluate the possibility of charitable giving at death

Charitable gifts are fully deductible from your estate for tax purposes. So, if you leave your assets to a qualified charity, they are excluded from your taxable estate. This lowers the amount of estate tax your heirs may owe in the future. For high-net-worth individuals who may be worried about the reduced exemption limits post-2025, this can be a good tax-saving opportunity.

Why does hiring an estate advisor matter now more than ever?

With so many advanced estate planning strategies on the table, things can get complicated pretty quickly. Experienced estate planning advisors can help you make timely decisions before the year ends. At a time when time itself matters the most, professional guidance can be essential. Wiser Advisor’s free advisor match tool can be a good place to look for an advisor.

Starting January 2026, unless Congress steps in with new legislation, many of the tax-friendly provisions under the TCJA may expire. So, the benefits around estate and gift taxes could be rolled back, which can potentially increase your tax burden. But there is limited time to act. You have a few months to make strategic decisions. Make estate planning and taxes a priority now and soak in all the advantages of the TCJA.