Ready to learn more?

Explore More

Home » Insights » Estate Planning » What To Know About Estate Tax Exemptions in 2025
Bryan Strike, MS, MTx, CFA, CFP®, CPA, PFS, CIPM, RICP®
Director, Financial Planning
Learn about 2025 estate tax exemptions and how they may impact your wealth planning. Stay informed to protect your legacy.
As we navigate the current financial landscape, staying informed about estate and gift tax exemptions is crucial. These updates impact estate planning strategies, helping individuals and families efficiently preserve wealth and transfer assets. This article explores the latest estate tax changes, their implications, and key strategies to help preserve your wealth before potential reductions to the current estate tax exemption in 2026.
Estate and gift taxes are imposed on the transfer of wealth, either during a person’s lifetime or upon death. The IRS sets annual exclusions and lifetime exemptions to allow individuals to pass on a limited amount of assets without incurring federal taxes. These exemptions are adjusted periodically based on inflation and legislative changes.
The Tax Cuts and Jobs Act (TCJA) of 2017 significantly increased the estate tax exemption, but under current law, these provisions are set to expire after 2025, potentially reducing the exemption by half in 2026. Therefore, understanding and utilizing 2025’s increased limits is essential.
One of the key updates for 2025 is the increase in the annual gift tax exclusion, which allows individuals to gift a specific amount per recipient without tax consequences.
Consider a couple with three children and five grandchildren. By taking advantage of the 2025 gift tax exclusion:
Even for those not concerned about estate taxes, the annual exclusion is a valuable tool for transferring wealth gradually while avoiding gift tax return filings. Beyond the annual exclusion, in 2025, individuals can transfer a more substantial amount over their lifetime or upon death without incurring federal taxes. For 2025:
If you have already maximized lifetime gifts, the 2025 increase allows you to gift an additional $760,000 tax-free before the exemption potentially drops in 2026.2
With the new updates, a business owner with an estate valued at $30 million can:
Unless Congress takes action, the estate tax exemption will drop by half in 2026 (estimated to around $7 million per individual). This shift could expose more estates to federal taxation, making 2025 a crucial year for proactive planning.3
Married couples with one non-U.S. citizen spouse face different tax rules. Unlike citizen spouses, non-citizens do not qualify for the unlimited marital deduction:
Since a non-U.S. citizen spouse may not be subject to U.S. estate tax, unlimited tax-free transfers aren’t allowed — a rule designed to prevent estate tax avoidance. Proper planning, such as Qualified Domestic Trusts (QDOTs), can help maximize exemptions. Visit the IRS website for answers to frequently asked estate tax questions.
With a possible reduction in 2026, 2025 presents a critical opportunity for estate planning. Consider the following strategies:
Estate tax planning in 2025 is more critical than ever, with increased exemptions offering a window of opportunity before potential reductions in 2026. Individuals can optimize their financial legacy by leveraging annual gift exclusions, lifetime exemptions, and strategic wealth transfer tools while minimizing tax liabilities. Visit our library of estate tax articles and contact your wealth advisor to create a strategy that fits into your comprehensive wealth management plan.
If you’re not a Mercer Advisors client and want to learn more, let’s talk.
1 Taylor, Kelly R. “What is the Gift Tax Exclusion for 2024 and 2025?” Kiplinger, March 2025.
2 Wells, Sara A. “IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2025.” Morgan Lewis, Oct. 24, 2024.
3 “Prepare for Future Estate Tax Law Changes.” Fidelity, March 3, 2025.
Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. Hypothetical examples are for illustrative purposes only. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER® certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.