Legislative forecast: Lots of uncertainty … and a bright spot

Among the many issues advisors are grappling with in 2025 is the looming question of what will happen with tax policy that impacts your clients. Certainly as attorneys, CPAs and financial advisors, you are well aware that year-end planning advice will likely be impacted by new laws. In the case of your clients who are charitably inclined, for example, the potential drop in the estate tax exemption may cause clients to reconsider the timing and amount of their gifts to favorite charities.

While a drop in the estate tax exemption under the 2017 Tax Cuts and Jobs Act (TCJA)’s sunset is still a possibility, recently-introduced legislation may make that less likely. On February 13, 2025, lawmakers in both the House and Senate introduced the Death Tax Repeal Act of 2025, aiming to permanently eliminate the federal estate tax, as well as the federal generation-skipping transfer (GST) tax. Needless to say, if this act becomes law, the landscape of tax planning will change dramatically. 

As you know, under current law, the Internal Revenue Code imposes a 40% estate tax on transfers at death and a 40% gift tax on certain transfers made during life, though each individual benefits from a “unified credit” that exempts up to $13,990,000 in 2025 from these taxes. The GST tax, also set at 40%, applies to transfers to individuals two or more generations below the transferor, with an exemption equal to the unified credit. These exemption levels are at a historic high thanks to the TCJA, but will revert back to about $7 million in 2026 without intervening legislation.

Here’s what you need to know about the Death Tax Repeal Act:

–The Act would permanently abolish the federal estate and GST taxes, allowing unlimited transfers at death without federal tax.

–The Act would set a permanent lifetime gift tax exemption of $10 million (indexed for inflation, currently $13,990,000 in 2025), with a reduced gift tax rate of 35% on transfers exceeding that amount.

–Crucially, the Act would retain the current “step-up in basis” for appreciated assets at death. Eliminating the step-up in basis had been on the table during the Biden Administration.

With all eyes on broader tax reform, it would be easy to overlook another recently-introduced piece of legislation that could help your clients with charitable giving: legislation was just introduced to allow Qualified Charitable Distributions to donor-advised funds. If this provision becomes law, your clients who are over 70 ½ would be able to make transfers from their IRAs to many types of funds at the Community Foundation for Greater Atlanta, including donor-advised funds (which is currently prohibited).

As always, the Foundation keeps its finger on the pulse of tax developments that could impact your clients’ charitable plans. We are honored to be your first call anytime the topic of charitable giving surfaces in your conversations. Most of the time, the Foundation’s tools can help. If not, we will point you in the right direction!