As the 2026 tax sunset approaches, estate tax rates will rise, and the estate tax exemption will decrease. Failing to plan ahead could result in a significant tax burden for your heirs. Here’s what to expect, with references to key tax laws, and how Your Choice Financial can assist with estate planning.
Changes to Estate Tax Rates
Currently, the estate tax exemption is set at $12.92 million, allowing estates below this threshold to pass on wealth tax-free. However, when the 2026 tax sunset occurs, this exemption will decrease to roughly $5 million . Estates exceeding this amount will be subject to much higher estate tax rates, potentially eroding your wealth.
Estate Planning Strategies
Your Choice Financial offers several solutions to help minimize estate taxes:
- Life Insurance in Trusts: Placing life insurance in an Irrevocable Life Insurance Trust (ILIT) can ensure that death benefits are not included in your taxable estate, providing heirs with funds to cover estate taxes.
- IRA Annuity Conversion: Converting an IRA into an annuity could provide a predictable income stream while reducing the size of your taxable estate.
- Purchasing Life Insurance for Estate Tax: Life insurance can be an effective way to cover estate taxes, ensuring that your heirs won’t have to sell assets to meet tax obligations.