Crucial Updates to Estate Tax Exemptions and the Corporate Transparency Act in 2025 - Trusts & Estates and Elder Law Newsletter
As we turn the calendar from 2024 to 2025, there are critical updates to federal and New York State estate tax exemptions, as well as changes to the annual gift tax exclusion that could impact your estate planning. Moreover, one of hottest legal topics of 2024, the Corporate Transparency Act, is in a constant state of flux regarding its enforcement. Here’s what you need to know:
Federal Estate Tax Exemption Update
The federal estate tax exemption has increased from $13.61 million in 2024 to $13.99 million in 2025. Accordingly, married couples can utilize a total exemption of $27.98 million to shield their assets from federal estate taxes. Due to the increased exemption amount, even married couples who have already used up their exemptions will receive another $760,000 to gift in 2025.
As before, estates valued above the exemption threshold may be subject to federal estate taxes, with rates reaching forty (40%) percent.
New York State Estate Tax Exemption Update
New York State has its own estate tax with a significantly lower exemption threshold than the federal level. For 2025, the New York State estate tax exemption is $7.16 million (increased from $6.94 million in 2024). Additionally, the "estate tax cliff" remains in effect, which can result in the loss of the entire exemption if the estate exceeds the exemption amount by 5% or more.
Increased Annual Gift Tax Exclusion
The annual gift tax exclusion has risen to $19,000 per donee for 2025, which is an increase from $18,000 in 2024. The annual exclusion allows individuals to make tax-free gifts up to the exclusion amount each year without affecting their lifetime exemptions.
Corporate Transparency Act
If you have been following the changes to the Corporate Transparency Act (CTA) this year, you would be forgiven for being completely confused by where it stands. As a recap, the CTA is a federal law that went into effect on January 1, 2024, that mandates most businesses operating in the United States to reveal their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). There had been various legal challenges to the CTA throughout 2024, which delayed enforcement of the CTA. On December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit paused enforcement of the CTA, which reversed an earlier decision from December 23, 2024, that reinstated the CTA. Thus, enforcement of the CTA is on hold until further notice. On December 31, 2024, the Department of Justice asked the Supreme Court to halt the injunction pending a final decision by the Fifth Circuit. There is no news as of this time, but we will update you if there are any further changes.
Stay Informed
As of now, the increase in the federal estate tax exemption is still scheduled to sunset in 2026. This would lower the federal exemption to $5 million indexed for inflation (most estate planners believe the exemption will be closer to $7 million). However, with a new presidential administration set to begin, there will undoubtedly be significant changes in the world of Estate Planning in 2025. If you have questions about any of these changes and the impact on your own estate planning, be sure to reach out to the Trust & Estate attorneys at Pashman Stein Walder Hayden P.C.
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