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Why you may need to create your estate plan with an eye to 2026

On Behalf of | Mar 19, 2024 | Probate & Estate Planning

Rhode Island is one of a minority of states that has an estate tax. That tax is in addition to the federal estate tax. For 2024, that tax kicks in only if an estate is valued at more $1,774,583, which is considerably lower than the current federal estate tax threshold, which is $13.61 million. Unlike the federal estate tax, which doubles for a married couple’s estate, the Rhode Island threshold remains the same for married couples as for individuals.

While it is generally important to keep in mind that threshold amounts typically increase every year, it is also important to know about an upcoming change that could affect whether or not your estate will be required to pay federal estate tax. One provision of the Tax Cuts and Jobs Act (TCJA), which took effect in 2018, raised the threshold amount for the federal estate tax so that more high-value estates are exempt from this requirement.

However, the TJCA will “sunset” at the end of 2025. That means the federal estate tax threshold will revert to what it was before the law took effect – specifically to less than $6 million for individuals’ estates.

There are steps you can take as part of your estate planning that might reduce certain future taxes. Certain types of trusts, for example, can help insulate assets from estate taxes. You may choose to gift some of your assets to loved ones or charitable organizations, while staying aware of gift taxes. Considering your entire financial situation and planning ahead is important to meeting your financial goals for life and for your estate.

Seeking legal guidance is a good way to benefit from personalized feedback in this regard.