Congress is once again reworking the tax code. This time, the stakes are high. A new tax proposal introduced in the House of Representatives seeks to extend and expand several provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, including a potential increase to the federal estate tax exemption and significant benefits for pass-through business owners.

How JM LAW Prepares You For Changes In Estate & Tax Law

At JM LAW, we believe tax planning shouldn’t hinge on what-ifs, but rather on creating a smart, strategic estate and legacy plan, proactively reviewing and updating your plan, and working closely with your trusted advisors. We factor changes in laws into all of our estate and legacy plans. Below is the legislation we are tracking—and what you should consider doing now.

Federal Estate Tax: Expect Higher Exemptions & New Risks

What you need to know:

• The law would raise the federal estate and gift tax exemption amount to $15 million per person, indexed for inflation.
• The law would make the increased exemption permanent, avoiding the scheduled 2026 sunset that would drop the exemption limit back to about $7 million.

Implications for your estate plan:

• The risk of a lower exemption amount is real. If the bill stalls in the Senate or fails to pass, the exemption will revert to about $7 million in 2026.
• Formula clauses might not work as intended. Trusts that use a formula based on exemption amounts should be reviewed or revised to make sure that they work as you intended.
• Portability is still critical. The IRS’s 5-year window for surviving spouses to claim the unused estate tax exemption (DSUE) remains key in planning for married couples.

Estate planning recommendations:

Now is the time to schedule a consultation to review your estate and legacy plan to make sure that it’s compatible with both the current $13.99 million exemption and the proposed $15 million exemption, while still preparing for the risk of a change back to about $7 million in 2026. The JM LAW team always builds flexibility into trusts so that they continue to work as intended as laws change.

Business Owners: Expect New Pass-Through Opportunities

What you need to know:

• The law would raise the qualified business income (QBI) deduction from 20% to 22%.
• The law would make the lower TCJA-era tax brackets permanent for individuals and pass-throughs.
• The law would extend favorable rules for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI)—a win for multinational business owners.

Implications for your estate plan:

• How you structure your business entity matters. Not all pass-throughs qualify. It’s essential to choose the right entity: LLC, S corporation, or C corporation.
• The qualified business income deduction affects estate planning tools like intentionally defective grantor trusts and grantor retained annuity trusts used in business succession.

Estate planning recommendations:

Your JM LAW estate planning team will coordinate with your tax advisor and business attorney to ensure that all elements—entity classification, ownership structure, and estate strategy—work in harmony.

Specific Recommendations For JM LAW Clients

For business owners:

• Check to see if your business structure qualifies for the expanded qualified business income deduction.
• Consider using estate planning strategies like spousal lifetime access trusts, intentionally defective grantor trusts, and grantor retained annuity trusts as you plan for business succession.
• Coordinate with your CPA and estate planning attorney about how the business entity you’ve chosen will support your tax and estate planning goals.

For high-net-worth families:

• Take advantage of today’s high exemption while it lasts—consider lifetime gifting, spousal lifetime access trusts, and charitable donations.
• Where you live and where you own property or a business make a difference. You’ll need to check each state’s estate and tax laws, too. 

If your estate exceeds $7 million ($14 million for couples), we urge you to schedule a comprehensive estate planning review now. This is your window to ensure your estate and legacy plan is aligned with current laws and expected changes. 

This post was created by Avatus Stone, COO & estate planning strategist at JM LAW, PLLC.