As we move through 2025, senior citizens and retirees are navigating an evolving estate planning landscape. Recent shifts in tax laws and exemption thresholds, along with new strategies, are reshaping how you can protect your legacy for the next generation.
In this article, we’ll break down the latest federal estate tax exemptions, explore wealth transfer tools like trust planning, and highlight legal developments that could impact your estate plan.
Current Federal Estate Tax Exemption and Thresholds in 2025
A key estate planning update in 2025 is the historically high federal estate tax exemption: $13.99 million per person or $27.98 million for married couples. This allows you to leave nearly $14 million to your heirs tax-free, or nearly $28 million as a couple, with proper planning. Any amount exceeding these thresholds is subject to federal estate tax, levied at a top rate of approximately 40%.
This exemption stems from the 2017 Tax Cuts and Jobs Act (TCJA) and has been adjusted annually for inflation. For many families, it has eased concerns about federal estate taxes. However, under current law, the exemption is scheduled to sunset after 2025, reverting to a lower level in 2026 unless Congress acts.
In addition to the lifetime exemption, the annual gift tax exclusion has also increased in 2025 to $19,000 per recipient (or $38,000 for married couples). You can give this amount to any number of people each year without using your lifetime exemption or triggering gift tax. It’s a simple way to transfer more wealth tax-free and reduce your future estate tax exposure.
At the same time, consider state-level taxes. Despite the high federal exemption, a dozen states and the District of Columbia still impose their own estate or inheritance taxes, often with much lower thresholds. For example, Oregon’s exemption remains at $1 million, while Massachusetts raised its threshold to $2 million in 2023. These lower limits mean that even moderately sized estates may be subject to state taxation.
To fully protect your legacy, your estate plan should account for both federal and state tax obligations.
Trust Planning Strategies for Wealth Transfer and Legacy Protection
Trusts remain powerful tools for protecting your legacy and facilitating wealth transfer. In 2025, with high exemptions and potential changes ahead, strategic trust planning is more relevant than ever. Trusts can help you bypass probate, maintain control over asset distribution, and in some cases, reduce tax burdens.
Below are key trust strategies and structures to consider:
Revocable Living Trusts
A revocable living trust is a legal arrangement you create that you can change or cancel. You typically serve as both the trustee (who manages the trust) and the beneficiary, giving you full control over the assets it holds. When you pass away, those assets can transfer directly to your named beneficiaries, bypassing probate court.
This speeds up the wealth transfer process, keeps your financial affairs private, and ensures continuity in asset management if you become incapacitated.
Note: A revocable trust does not reduce estate taxes, since the assets remain part of your taxable estate. However, it’s effective for organizing your legacy and avoiding probate delays and costs.
Irrevocable Trusts (Including Life Insurance Trusts)
An irrevocable trust generally cannot be changed or revoked once created. Assets transferred into the trust are removed from your personal ownership, potentially reducing estate taxes.
For example, an irrevocable life insurance trust (ILIT) can hold a life insurance policy on your life. When structured properly, the death benefit is paid to your trust’s beneficiaries outside of your estate, avoiding estate tax. Life insurance proceeds, often a significant asset, can be taxable if you own the policy personally. With an ILIT, a $1 million benefit (or more) could pass entirely to your family rather than being reduced by up to 40% in estate tax if your estate exceeds the exemption.
Irrevocable trusts can also be used to gift and transfer wealth during your lifetime. Once assets are placed in the trust, they—and any future appreciation—are no longer part of your estate. However, you give up direct control and access to those assets, so these trusts require careful planning and professional guidance.
Charitable Trusts
If charitable giving is part of your legacy, certain irrevocable trusts can help you support causes you care about while reducing estate taxes.
One example is a charitable lead trust (CLT), where you place assets into a trust that pays an income stream to a chosen charity for a set number of years or for your lifetime. After that period, the remaining assets pass to your family beneficiaries. Because the charitable portion is removed from your estate immediately, it can significantly reduce your taxable estate. Your heirs then receive what’s left, often with reduced tax liability.
By contrast, a charitable remainder trust (CRT) provides income to you or your beneficiaries for a period of time, and the remaining assets go to a designated charity at the end.
These arrangements can be complex, but they highlight how trusts can be tailored to support both your philanthropic goals and your family’s financial future.
Family and Legacy Trusts
For those with substantial assets, certain trusts can help preserve wealth across multiple generations. A dynasty trust, where permitted by state law, is an irrevocable trust designed to pass assets to children, grandchildren, and beyond, without incurring estate or generation-skipping transfer (GST) taxes at each generational level.
Similarly, married couples in 2025 may want to revisit the use of credit shelter trusts, also known as bypass or family trusts, in anticipation of lower estate tax exemptions after 2025. A credit shelter trust is typically established upon the death of the first spouse to hold assets up to that spouse’s exemption amount. The remaining assets pass to the surviving spouse. When structured properly, the trust assets are excluded from the surviving spouse’s estate, avoiding estate tax upon their death.
In recent years, many families skipped these trusts because the high exemption made them unnecessary. But if the exemption drops in 2026, credit shelter trusts may once again become a valuable strategy to ensure both spouses’ exemptions are fully used for the benefit of future generations.
In short, trust planning in 2025 should be forward-looking, accounting not only for current laws but also for potential changes ahead. The right trust structures can help you adapt and preserve your legacy.
Because every family’s situation is unique, the best trust strategies for you will depend on your specific goals, assets, and family needs.
Recent Legal and Policy Changes Affecting Estate Planning in 2025
The most significant looming change is the potential sunset of the current federal estate tax exemption after December 31, 2025. Under the TCJA, which took effect in 2018, the federal estate tax exemption was nearly doubled. However, this provision is set to expire at the end of 2025.
If Congress does not act, the exemption will revert on January 1, 2026, to its pre-2018 level of $5 million per person, adjusted for inflation. This would mean an exemption of roughly $6–7 million per individual—about half the current amount—potentially increasing the number of estates subject to federal estate tax.
For example, someone with an $8 million estate who dies in 2025 would owe no federal estate tax since the estate falls below the $13.99 million exemption. However, if that same person passed away in 2026, and the exemption were $6 million, approximately $2 million of the estate could be taxable. At a 40% tax rate, that would result in about $800,000 in federal estate taxes, reducing the amount passed on to heirs.
It’s important to note that the 2026 change isn’t certain—it depends on what lawmakers decide. Congress could extend the current higher exemption, allow it to drop as scheduled, or settle on a new amount. Uncertainty remains.
As of early 2025, discussions are underway in Washington, D.C., but no new legislation has been passed.
Given this, many financial advisors recommend planning ahead. That might include making large gifts in 2025 to take advantage of the current exemption or setting up trusts to lock in today’s rules.
The IRS has confirmed that if you use the higher exemption now—say, by gifting $10 million in 2025—you won’t be penalized later if the exemption drops. In other words, there’s no “clawback” of the tax benefit you’ve already used.
Beyond the major federal tax question, a few other legal and policy developments are worth noting in 2025:
Higher Gift and GST Tax Exemptions
The lifetime gift tax exemption and GST tax exemption are unified with the estate tax exemption, set at approximately $13.99 million per individual in 2025. This allows you to make substantial lifetime gifts to children or even grandchildren, either outright or through a trust, without incurring gift tax, up to that total amount.
State Law Changes
Several states have updated their estate planning laws in recent years. Some states that levy estate taxes have gradually raised their exemptions. Connecticut, for example, recently aligned its exemption with the federal level. Others have eliminated or phased out estate or inheritance taxes altogether.
On the other hand, a few states and the District of Columbia still impose estate taxes with relatively low thresholds, ranging from about $1 million to $6 million. If you’ve recently moved or if your state’s laws have changed, it may be time to update your estate plan.
State-level changes can impact your planning just as much as federal ones—sometimes even more, depending on where you live.
Retirement Account Inheritance Rules
While not an estate tax law, a recent policy change with estate planning implications involves inherited retirement accounts. The SECURE Act (enacted in 2019) and subsequent IRS regulations have changed how beneficiaries must withdraw funds from inherited IRAs and 401(k)s.
Most non-spouse beneficiaries are now required to withdraw the full balance of an inherited retirement account within 10 years of the original owner’s death rather than stretching distributions over their lifetime. This shift can have significant estate planning consequences. Large inherited IRAs may push heirs into higher income tax brackets, and accelerated withdrawals could disrupt long-term financial plans.
If you have substantial retirement assets, consider strategies such as Roth conversions, strategic beneficiary designations, or using trusts (in certain cases) to manage these changes effectively.
Estate planning isn’t just about minimizing estate taxes. It’s also about ensuring all assets, including retirement accounts, are transferred in the most tax-efficient way under current rules.
Case Study: J.S.’s Successful Estate Planning Journey
To illustrate how these concepts come together, let’s look at a real-life inspired case study (using initials for privacy).
J.S. is a 70-year-old retired airline pilot who wanted to ensure his financial affairs were in order for his family. He had tried managing his investments on his own and had also worked with a national investment firm, but the advice he received felt “cookie-cutter” and not tailored to his needs.
Meetings with his previous advisor were generic check-ins that failed to address key questions like: How can I optimize my portfolio for my heirs? Do I have the right estate planning documents in place? Worse, he was paying a significant fee for that one-size-fits-all service.
As J.S. began traveling more in retirement, he realized he needed a more hands-on approach, someone who would actively oversee his investments and guide him through big picture planning for the future.
J.S. turned to Fortis Financial Group for investment and estate planning advice. The team provided a clear, personalized plan that aligned his portfolio with his long-term estate goals. After years of struggling with technical jargon, J.S. appreciated having a straightforward roadmap. The Fortis advisors earned his trust by reviewing and updating his living trust and beneficiary designations, and by introducing new trust planning strategies tailored to his needs.
J.S.’s success stemmed from the strong relationship he built with his Fortis advisors, who were approachable, responsive, and genuinely invested in his goals. He valued their tailored guidance, not just for himself but also for his extended family. Fortis helped simplify his 100-year-old mother-in-law’s finances and estate planning, giving J.S. peace of mind that his loved ones were well cared for.
Today, J.S. feels confident about his legacy. His investments are positioned for long-term growth and wealth transfer, and his estate documents, including a living trust and will, are structured to minimize hassle and costs for his family. With Fortis Financial Group’s support, he’s turned uncertainty into a well-defined plan for the future.
Planning Ahead: Protecting Your Legacy in 2025 and Beyond
Estate planning can feel daunting, especially with laws in flux, but at its core, it’s about protecting your legacy for the people and causes you care about.
The 2025 updates are a timely reminder that regular reviews and adjustments to your plan are essential. Make sure you’re taking advantage of current opportunities, such as historically high exemptions and gifting limits, while also preparing for potential changes like the 2026 sunset.
Consider whether strategies like trusts, charitable giving, or lifetime gifts could strengthen your plan. And most importantly, don’t navigate it alone. Complex questions around wealth transfer and tax rules are far easier to manage with experienced professionals guiding the way.
How Fortis Financial Group Can Help
Fortis Financial Group is here to help you. Our team stays up to date on the latest tax laws and estate planning strategies, and we understand the unique concerns you may face as a senior or retiree when it comes to securing your family’s future.
Through our Estate Planning and Legacy Planning services, we work closely with you and your legal advisors to craft a plan that reflects your values and goals. Whether that means minimizing estate taxes, providing for a dependent, or ensuring a smooth transfer of assets to your children, we’re here to support you every step of the way.
If you’d like to review your estate plan or explore strategies tailored to your situation, Fortis Financial Group’s advisors are ready to assist, helping you face the future with clarity and confidence.
Fortis Financial Group is a fiduciary wealth management firm based in Bellevue, WA, specializing in comprehensive retirement planning and investment management. We focus on helping our clients reduce stress by knowing when they can securely retire, stop overpaying taxes, and reduce the anxiety of financially navigating life transitions.
