How Changes in the Tax Code May Alter the Legal Landscape for Your Family

 This guest post is from Harold Boatwright, Regent Law 2L:

The goal of many working Americans has always been to become a millionaire. While this is still a noble goal many places in the country will require someone to obtain a portfolio of assets that far exceeds one million dollars to retire comfortably.  In December 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law, which significantly increased the gift and estate tax exemption. The exemption adjusted for inflation reached $12.92 million this year for an individual or $25.84 million for a couple. Absent Congress extending this large exemption put in place by TCJA on January 1, 2026, the amount will drop to an estimated $6.2 million for an individual or $12.4 million for a couple. There are only 1.1 million individuals in the U.S. with a net worth of $12 million or more while the number of individuals with a net worth of $5 million or more is around 5 million. This means that almost 4 million people who were once able to pass all of their wealth tax-free will need substantial estate planning to avoid estate tax treatment.

The role of an estate planning attorney is to find ways to transfer their clients’ assets according to their wishes and in a manner that reduces taxes. The assumption is that many of their previous clients who would need minimal tax planning may soon be subject to the estate tax after the year 2026. This will require what some would call the “simple country lawyer” to respond in one of two ways to adequately represent their clients with taxable estates.

One option for smaller firms will be to refer many of their clients to tax professionals and larger firms that are prepared to represent high-net-worth individuals. Another option is to self-educate and hire attorneys with tax experience. This solution is not an easy one as this area of law is extremely complex where the stakes are high, and this knowledge is not gained overnight.  

There are thousands of people all across the United States who trust small law firms with all their legal needs including estate planning. The sunset of the estate tax exemption in 2026 will require these small law firms to take action to adequately represent their clients and will most probably change the legal landscape across the country.