As expected, new federal legislation has been proposed that would significantly change the estate and gift tax landscape. We expect this law to pass. While this may seem like good news, changes in the tax code are “permanent” until they aren’t. A future Congress can always change the law back to a lower exemption amount or reduce the strategies available to us to lower your estate taxes. 

If enacted, the “Death Tax Repeal Act” would: 

1. Permanently repeal the federal estate tax and generation-skipping tax, allowing individuals who pass away after the law is passed to transfer an unlimited amount of wealth at death, free of estate and generation-skipping taxes. 
2. Retain step-up in basis: maintain the current step-up in basis rules that apply at death, meaning that if a person dies who owns assets that have appreciated, those assets would receive a full “step-up” in basis to the fair market value as of the date of death. This allows beneficiaries to minimize capital gains on the sale of inherited assets.
3. Impose a permanent gift tax exemption and reduced gift tax rate: the lifetime gift tax exemption would be set at $10,000,000 (adjusted to $13,990,000 in 2025). The exemption would apply only to lifetime transfers and any transfer made in excess of the exemption would be subject to a reduced 35% rate. 

As the only thing that is certain is change, we recommend that clients who are concerned with the permanency of these changes and who are contemplating lifetime gifting schedule a consultation with us now to review your estate plan. We’ll recommend any changes in gifting strategies to take advantage of the gift tax exemption that is currently in place with the objective of removing assets from your estate to protect them from future laws that might reimpose estate and generation-skipping transfer taxes on the transfer of wealth.

Because this law would become effective “upon enactment,” the time to plan is now.

In addition, if you live or have assets in Maryland, know that the governor has proposed abolishing the inheritance tax on transfers and gifts made within two years of the date of death.   At the same time, the governor proposed a dramatic cut to the estate tax exemption from $5 million per person and $10 million per couple to $2 million per person and $4 million per couple. These changes are expected to go into effect in just a few months: in July 2025.

Again, the time to plan is now. 

If you have questions or think any of these changes may affect you, please contact us to schedule a consultation.

For those interested in understanding more about the differences between inheritance and estate taxes and who these taxes affect, read our quick explainer on LinkedIn.

For those preparing for tax season and the year ahead, we’ve created an additional resource for you: see our 2025 helpful tax guidelines handout packed with easy-to-read information on tax rates, deductions, and contribution limits.

This post was created by Jessica Marchegiano, founder of JM LAW and senior estate planning attorney.