Estate Planning: Exemption Sunsets Soon, Take Action to Preserve Your Legacy

In Tampa Bay, our sunsets are nothing short of spectacular. But there’s another kind of sunset approaching that affects estate planning decisions. Key estate tax provisions are potentially sunsetting at the end of 2025.  

Without new legislation, the federal estate and gift tax exemption will dramatically decrease. The amount will decrease from $13.61 million per person in 2024 to approximately $6 million in 2026 (including adjustments for inflation). This change could significantly impact the estate plans for many high-net-worth individuals and families.  

With the change, more estates could be subjected to federal estate taxes. New laws may be enacted to prevent this change, but it’s impossible to predict.  

It’s crucial to start conversations on estate plans now. Early discussions with your clients assure they have plenty of time to choose estate planning strategies that align with their goals. They may consider transferring wealth to the next generation and/or creating a lasting philanthropic legacy.  

Charitable Giving as part of the Estate Plan

It’s an excellent time to take action if your clients are considering philanthropy. Larger lifetime gifts to charity or planned charitable gifts at death can help reduce the taxable value of their estates while providing meaningful tax savings.

At Community Foundation Tampa Bay, we create customized charitable giving strategies that provide a flexible and effective way to manage both lifetime and estate gifts.  

The charitable gift vehicle changes for each individual situation, and can include:

• Donor Advised Funds: These funds allow your client to make charitable contributions when it’s most beneficial for tax planning, while giving them the flexibility to decide on ultimate beneficiaries later.

• Family Foundation Funds: Donor advised funds that function like a family foundation, with successive generations serving as advisors, instill a philanthropic legacy in their family.

• Field of Interest Funds: If your client has a specific charitable cause in mind, this type of fund directs annual grants to support that purpose, with Community Foundation selecting the nonprofits that will receive the funds.  

• Designated Funds: These funds allow clients to specify particular nonprofits for support with annual grants.

• Scholarship Funds: Set up to provide financial support to students, these funds can be tailored to specific criteria such as the institution attended, field of study or geographic location. Clients or their designees may even serve on the selection committee.

• Legacy Funds: These funds are established to receive gifts from your client’s estate or trust, continuing their charitable impact long after they are gone.

Advanced Estate Planning Strategies

For clients with significant estates, it may be wise to explore more comprehensive, multi-generational wealth transfer plans, taking advantage of the current higher exemptions.  

Three key strategies to consider:

• Charitable Lead Trust (CLTs): CLTs can be particularly effective in the current environment. These trusts provide income to your client’s fund at Community Foundation for a set period, with the remaining assets eventually passing to family members. The current higher exemption allows for significant initial funding, because the remainder interest will use up a portion of the client’s estate and gift tax exemption.

• Generation-Skipping Trust: These irrevocable trusts benefit grandchildren and later generations, utilizing your client’s generation-skipping transfer (GST) tax exemption (which parallels the estate and gift tax exemption). These trusts could allow your client to take advantage of the higher exemption before it potentially decreases in 2026. Under Florida law, these trusts can continue for many generations, providing income and potentially principal for health and education without the trust’s assets being included in the beneficiaries’ estates for estate tax purposes. 

• Family Foundation Fund: Whether used alongside a CLT or generation-skipping trust, or as a standalone option, your client can establish a family foundation fund. This type of fund allows successive generations to serve as advisors.

The Community Foundation’s Philanthropy team is ready to assist you and your clients. Whether your clients are just beginning to explore their options or are ready to take action, we can collaborate. By working together, we can achieve their long-term estate planning and charitable giving goals.

Start planning today to preserve your clients’ legacies and maximize their impact.

Laurie Valentine, J.D. brings over 40 years of legal and nonprofit leadership to her role as Counsel for Philanthropic Giving at Community Foundation Tampa Bay. Her deep commitment to impactful philanthropy and extensive experience make her a trusted advisor for those seeking to build lasting legacies in the Tampa Bay community.