The TCJA Sunset Is Coming: Why 2025 May Be the Most Important Year for Estate Planning in a Generation

2026 Update: The New Reality: This article was originally drafted in 2025 to address the scheduled "sunset" of the Tax Cuts and Jobs Act. Since its writing, the legislative landscape has shifted. With the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025, the scheduled reversion to lower exemption amounts was replaced by a new, permanent baseline. For 2026, the federal estate and gift tax exemption has actually increased to $15 million per individual (up from $13.99 million in 2025), or $30 million for married couples. While the "cliff" described below was avoided, the strategies discussed—such as SLATs, GRATs, and ILITs—remain vital tools for families to lock in these historically high levels and protect future appreciation from taxation.

There are moments in financial planning that arrive with a clear deadline and a concrete consequence. Most of the time, wealth planning is characterized by gradual decisions, flexible timelines, and the comfortable sense that there will always be more time to get things right. The approaching sunset of the Tax Cuts and Jobs Act is different. It is a known event, with a known date, carrying potentially enormous financial consequences for high-net-worth families — and right now, the window to act is open.

Understanding what's at stake, why it matters specifically to families in your wealth range, and what options exist requires moving past the headlines and into the substance. That's the purpose of this post.

What the TCJA Did — and What Happens When It Ends

When Congress passed the Tax Cuts and Jobs Act in 2017, one of its most significant provisions was a near-doubling of the federal estate and gift tax exemption — the amount a person can transfer to heirs during life or at death without triggering federal transfer taxes. In 2025, that exemption stands at approximately $13.99 million per individual, or roughly $27.98 million for a married couple using portability.

Under current law, those exemption amounts are scheduled to sunset on December 31, 2025. If Congress does not act — and as of this writing, no permanent extension has been enacted — the exemption reverts to its pre-TCJA baseline of approximately $5 million per person, adjusted for inflation. That figure is currently estimated to land somewhere around $7 million per individual, or $14 million per couple.

For a married couple with a combined estate of $20 million, the difference between planning before the sunset and failing to act before it is potentially dramatic. Under current law, their estate falls comfortably within the combined exemption. Under the reverted exemption, a meaningful portion of their estate could be subject to the 40% federal estate tax rate. The arithmetic on that gap is not abstract — it can represent millions of dollars that pass to the IRS rather than to children, grandchildren, or causes that matter to the family.

Why "Wait and See" Is a Planning Strategy With a Cost

The most common response to a scheduled legislative change is to wait — to see whether Congress acts, whether the law actually changes, and whether planning is truly necessary. This is understandable. Legislative outcomes are uncertain, estate planning is emotionally complex, and the natural tendency is to defer action until certainty arrives.

But "wait and see" is not a neutral stance. It carries its own risk, and that risk is particularly acute here for two reasons.

First, the planning strategies that are most effective for large estate reductions require time to implement properly. Irrevocable trusts need to be drafted, funded, and administered. Gifting programs require deliberate structuring. Strategies involving life insurance, family limited partnerships, spousal lifetime access trusts, or charitable structures take months — sometimes longer — to put in place correctly. Waiting until the fourth quarter of 2025 to begin planning, only to find that advisors and estate attorneys are overwhelmed with last-minute clients, is a predictable and avoidable mistake.

Second, the opportunity to lock in the elevated exemption through lifetime gifting is explicitly available now and may not be available at the same scale later. The IRS has confirmed through formal guidance that gifts made under the current elevated exemption will not be "clawed back" if the exemption subsequently decreases — meaning that a gift made in 2025 under the $13.99 million exemption is locked in, even if the exemption later reverts to $7 million. That assurance is meaningful, and it creates a genuine now-or-later distinction that does not exist in most planning contexts.

The Strategies Worth Understanding

Estate planning in response to a sunset isn't one-size-fits-all. The right approach depends on the size and composition of the estate, liquidity needs, family circumstances, and goals. But there are several strategies that are especially relevant for families in the $5 million to $50 million range, and understanding the basics of each is useful before sitting down with an estate attorney.

Spousal Lifetime Access Trusts, commonly called SLATs, allow one spouse to make an irrevocable gift to a trust that benefits the other spouse — thereby removing assets from the taxable estate while retaining indirect access through the beneficiary spouse. For married couples, SLATs are among the most commonly recommended tools in this environment because they allow meaningful asset transfers while preserving some degree of flexibility. They require careful structuring to avoid technical pitfalls, including the "reciprocal trust doctrine," but when done correctly they are powerful.

Irrevocable Life Insurance Trusts, or ILITs, remove life insurance death benefits from the taxable estate while providing liquidity to heirs at the time it is most needed — often to pay estate taxes on illiquid assets like real estate, a business interest, or a concentrated investment portfolio. For families whose estate includes significant illiquid assets, an ILIT can be the difference between heirs having options and heirs being forced into a distressed sale.

Grantor Retained Annuity Trusts, or GRATs, allow a person to transfer appreciation on assets to heirs at reduced or zero gift tax cost, by retaining an annuity stream for a specified term. In a rising interest rate environment, GRATs are less powerful than they are in low-rate environments — but they remain valuable for assets expected to appreciate meaningfully, including business interests, private equity stakes, or concentrated growth positions.

Direct lifetime giving — simply using the annual gift tax exclusion ($18,000 per person per recipient in 2025) or making larger gifts against the lifetime exemption — is the most straightforward strategy and is accessible to families at virtually every wealth level. For families who have not been systematic about lifetime giving, establishing a thoughtful program now can remove significant value from the taxable estate over time.

Direct payments for education and medical expenses, made directly to the institution or provider, are excluded from gift tax entirely — not counted against the annual exclusion or the lifetime exemption. For grandparents or parents with significant wealth and descendants in school, this is one of the most efficient and underutilized transfer mechanisms available.

The State-Level Dimension Many Families Miss

Federal estate taxes get the most attention, but twelve states and the District of Columbia impose their own estate taxes, several with exemptions that are far lower than the federal level. Tennessee repealed its estate tax in 2016, which is advantageous for families domiciled here. But families with real estate, business interests, or legal connections in other states — particularly states like Massachusetts, Oregon, or Washington, which impose estate taxes on estates above $1 million or $2 million — may have state-level exposure that is separate from, and in addition to, any federal liability.

For families with assets or interests across multiple states, the domicile question is not merely administrative. It can carry significant financial weight, and it should be part of any comprehensive planning conversation.

What a Coordinated Planning Process Looks Like

The families who navigate this window most effectively are the ones who approach it as a coordinated exercise — not a one-time conversation with an estate attorney, but an integrated review that brings together the estate attorney, the CPA, and the wealth manager around a shared understanding of the family's full picture.

The estate attorney drafts and structures the legal documents. The CPA models the tax implications, evaluates income tax consequences of various structures, and coordinates timing. The wealth manager ensures that investment strategy, asset allocation, and liquidity are aligned with whatever structures are being established — because gifting assets into a trust changes how those assets need to be managed, and the two should not be planned in silos.

If you haven't had that coordinated conversation recently — or if you have a plan that was established more than two or three years ago and hasn't been revisited — now is the right time. Not because the sky is falling. But because the window that currently exists is unusually wide, and windows like this don't stay open forever.

Christi Shell, CWS®, AAMS®, BFA™, CETF®, is Managing Director and Private Wealth Strategist at Shell Capital Management, LLC. With more than 27 years of experience, she works directly with physicians, business founders, and executives navigating complex financial lives—coordinating estate planning, tax strategy, asset protection, retirement income, and multigenerational wealth planning into a single, integrated approach. Christi holds the Certified Wealth Strategist® designation and has completed the Wealth Management Theory & Practice executive program at the Yale School of Management.

To speak with Christi about your financial situation, request a private consultation.