IRS Announces Higher Gift and Estate Tax Exemptions for 2025 — And Why the Clock Is Ticking

Each fall, the IRS releases updated gift and estate tax figures for the coming year. The 2025 numbers bring welcome increases — but they also come with an important warning that every family with assets should understand.

The 2025 Numbers

The annual gift tax exclusion is increasing in 2025 to $19,000 per recipient — the highest exclusion amount ever — up from $18,000 in 2024. The estate and gift tax exemption will be $13.99 million per individual for 2025 gifts and deaths, up from $13.61 million in 2024. A married couple can shield a total of $27.98 million without paying any federal estate or gift tax. Morgan Lewis

What These Numbers Mean for Your Family

The annual gift exclusion resets every year. You can give up to $19,000 to any person — a child, grandchild, or anyone else — without filing a gift tax return or touching your lifetime exemption. A married couple can combine their exclusions to give $38,000 per recipient. If a married couple has two children and three grandchildren, they may transfer $190,000 in 2025 to their descendants without touching their combined $27.98 million lifetime gift tax exemption. Koley Jessen

The lifetime exemption covers larger transfers — assets passed at death, gifts above the annual exclusion, and wealth moved into trusts. At $13.99 million per person, most families won't owe federal estate tax. But for those with businesses, real estate, or investment portfolios, the picture can change quickly.

The Urgent Warning: A Sunset Is Coming

Here is why 2025 is not just a routine update year. The lifetime estate and gift tax exemption is set to "sunset" — revert to prior law — on January 1, 2026 unless further legislation is enacted during 2025. If Congress fails to act, the lifetime exemption amount will be cut in half. Koley Jessen That would mean roughly $7 million per person instead of nearly $14 million.

For families with estates that could be affected, 2025 may be the last year to act at the current historically high exemption levels. Gifts made now lock in the benefit of the higher exemption, even if the law changes later.

What to Do Before Year-End

Review your estate plan now. If your estate could eventually approach estate-taxable territory, talk to an attorney about strategies — annual gifting, irrevocable trusts, or larger lifetime transfers — that make use of the current exemption while it's available.

📌 Contact Fan Law Office to schedule your estate planning review before year-end.