Act now or pay later.

That’s because in 18 months the lifetime estate and gift tax exemption thresholds will be effectively cut in half barring action from Congress. The exemption will fall from $13.61 million per person to approximately $7 million to $7.25 million. For married couples, the exemption will drop from $27.2 million to $14 million to $14.5 million.1 Any estate assets above that threshold are subject to a 40% federal estate tax.

The change is many months away, but revisiting an estate plan now will avoid last-minute chaos with financial planning, as many advisors expect to be swamped in 2025.

In light of the 2026 estate tax changes, how to minimize estate taxes through gifting

One way to reduce the tax bill on future generations is through a thoughtful approach to gifting. As it implies, a gifting strategy entails giving away assets during one’s lifetime in a way that minimizes the tax burden for inheritors.

Here are four strategies:

  1. Maximize annual gifts. Without touching the lifetime estate and gift tax exemption, individuals can make tax-free gifts of $18,000 annually ($36,000 for couples) to as many people as desired. The recipients could be any family member or friend; the gift can be in the form of cash or property.

    In addition, gifts can include contributions to a 529 college savings plan. Parents or grandparents can front-load up to five years’ worth ($90,000) of gifts to a 529 plan beneficiary without paying gift taxes or using part of one’s lifetime gift tax exclusion.
  1. Create an intentionally defective grantor trust (IDGT). An IDGT can be used to remove an asset from the grantor’s estate. What makes it “defective” is that while the income from the assets is taxed, the taxes are paid by the grantor, not the trust. This structure allows the gifted assets in the trust to grow without having to pay tax from the trust itself.
  1. Create spousal lifetime access trusts (SLATs). One spouse can create a SLAT, which is a form of irrevocable trust, for the benefit of their spouse. The SLAT allows the grantor to retain as much control as possible over property and assets while minimizing taxes. Each spouse can set up a SLAT for their partner. However, it’s important that the trusts are dissimilar: Identical trusts may violate a reciprocal trust doctrine and be nullified by the IRS.
  1. Consider a grantor retained annuity trust (GRAT). GRATs are irrevocable trusts that are typically funded with assets such as stocks, bonds and businesses that are expected to appreciate over time. The GRAT holds the asset for the term of the trust and pays the grantor an annuity. When the GRAT expires, the remaining assets are then distributed to beneficiaries without using estate and gift tax exemptions.

Although many individuals and their families may already have some vehicles or strategies to deal with estate taxes through gifting, the change in the exemption warrants revisiting them with a professional.

HUB Retirement and Private Wealth offers institutional and retirement services to for-profit and not-for-profit organizations and customized private wealth management services to individuals and families. HUB Retirement and Private Wealth employees are Registered Representatives of and offer Securities and Advisory services through various Broker Dealers and Registered Investment Advisors, which may or may not be affiliated with HUB International. Insurance services are offered through HUB International, an affiliate.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

1 EideBailly, “Estate and Gift Tax – Estate Planning Now and for the 2026 ‘Double Exemption’ Sunset,” accessed June 27, 2024.