As 2025 draws to a close, the current lifetime gift and estate tax exemption will soon be reduced. It’s crucial to take advantage of these tax breaks now to help transfer wealth to your heirs or favorite charities before the opportunity expires. Here’s a breakdown of key facts you should know about wealth transfer taxes.

Lifetime Exemption Limits

In 2025, the lifetime gift and estate tax exemption is set at $13.99 million. However, this amount is expected to be halved starting in 2026, so it’s a good idea to utilize this exemption while it’s still available. Transfers above this threshold will be subject to federal estate taxes. This exemption provides a valuable opportunity to move wealth without incurring taxes.

Unlimited Marital Deduction

If you’re married, you can take advantage of an unlimited marital deduction, allowing you to leave your assets to your surviving spouse without incurring federal estate tax. However, if you wish to use your deceased spouse’s unused estate tax exemption (known as portability), you must elect it on the estate tax return of the first spouse to die—even if no tax is due. Failing to elect portability could result in a federal estate tax bill.

Annual Gift Tax Exclusion

In 2025, individuals can give annual gifts up to $19,000, and married couples can give up to $38,000 per recipient without triggering a gift tax. For example, if you and your spouse give $50,000 to an individual in one year, $38,000 of that will be exempt from tax, and $12,000 will count against your lifetime gift exemption. Even after reaching your lifetime exemption, you can continue to give up to the annual gift exclusion amount without paying gift tax.

Reductions to the Lifetime Exemption

At the end of 2025, the lifetime gift and estate tax exemption is set to revert to the pre-2018 levels, which were $5 million per individual, adjusted for inflation. This reduction means that if you want to maximize the tax advantages, it’s wise to act before the exemption decreases.

Generation-Skipping Transfer Tax

A generation-skipping transfer (GST) tax applies when you transfer assets or money to grandchildren or any individual who is at least 37.5 years younger than you. The purpose of this tax is to prevent individuals from bypassing children and passing assets directly to grandchildren to avoid paying estate tax twice. The GST tax exemption is the same as the lifetime and annual gift tax exclusions.

Review Your Estate Plan

If it’s been some time since you last updated your estate plan, or if you’ve experienced significant life changes, such as a divorce or the passing of a spouse, now is the time to revisit your plan. Work with your attorney and wealth advisor to ensure your documents are up to date and reflect your current wishes.