Estate and Gift Tax Exemption: Sunset or Sunrise Webinar Summary

Featuring Panelists:

Cory Parnell, Principal at BGM

Michael Andrews, Estate & Trust Planning Expert, BGM

Rachel Dahl, Partner at DeWitt LLP

Leonetta Rence, Trust & Estate Advisor, Cornerstone Trust

Introduction: Urgency in 2025 Estate Planning

Cory Parnell opened the webinar by setting the tone: estate planning is not just advisable—it’s critical, especially given the looming sunset of the Tax Cuts and Jobs Act (TCJA) at the end of 2025. With this potential change, exemption amounts could be halved, triggering substantial estate tax liabilities for many.

“This isn’t just theory—it’s real money. Families could lose millions in wealth transfer opportunities if they don’t act by year-end.”

The Legal Landscape: Where the Estate Tax Stands

Historical Overview

Michael Andrews walked attendees through the evolution of estate and gift tax law:

• Pre-TCJA Exemption (2013): ~$5.25 million per person
• Current Exemption (2025): $13.99 million per person (indexed for inflation)
• Current Estate Tax Rate: 40% federally, plus possible state-level taxes (13–16% in MN)

Key Concepts:

• Unified Credit: Covers both lifetime gifts and estate transfers.
• Annual Exclusion: $19,000 per donor, per recipient ($38,000 per couple).
• Direct Gifts to Medical & Educational Institutions: Unlimited and tax-exempt if paid directly.

Advanced Strategy: Portability and Suey

Michael introduced the Deceased Spouse Unused Exemption (DSUE or “Suey”):

• Allows a surviving spouse to use a deceased spouse’s unused exemption.
• Not automatic—requires a timely filed estate tax return.
• Strategic use: Maximize gifting and avoid losing exemption at second death.

He stressed order of operations:

1. Use Suey first,
2. Then the original exclusion,
3. Finally, the TCJA “bonus” amount—which disappears in 2026 if not used.

What’s at Stake: The Cost of Inaction

Rachel Dahl highlighted a clear and present opportunity:

“We’re in a window where families can shift millions tax-free. That window may close soon.”

Her message: this is not about predictions—it’s about acting on current law. If the TCJA expires, the exemption drops to ~$7 million. For high-net-worth individuals, this translates to millions in new tax exposure.

Hidden Estate Risks: More Valuable Than You Think

Leonetta Rence told a powerful story of a client who unknowingly lived with $5 million worth of antiques—never disclosed in planning.

Commonly Overlooked Assets:

• Antique collections, fine art, coins
• Gold and bullion (especially amid market highs)
• Privately held businesses
• High-value vehicles
• Real estate in vacation or rental markets

Cory Parnell added that even closely held business valuations can surprise clients—and often push them into taxable territory.

Planning Structures: Trusts That Work

Credit Shelter Trusts (CSTs)

• Uses one spouse’s full exemption while preserving the surviving spouse’s use.
• Avoids double taxation and probate.
• Leaves a Family Trust that benefits heirs tax-free upon the second death.

Irrevocable Trusts

Leonetta and Rachel broke down multiple trust strategies:

Dynasty Trusts

• Multi-generational (in South Dakota, often perpetual)
• Ideal for preserving family wealth and values
• Can skip generations without extra tax (if GST exemption used)

Charitable Remainder Trusts (CRTs)

• Income to donor/family for life
• Remainder to charity
• Combines legacy giving with tax savings

Irrevocable Life Insurance Trusts (ILITs)

• Keeps death benefits out of taxable estate
• Often overlooked despite high impact 

Gifting Strategies: Timing Is Everything

Rachel detailed two categories:

Small Annual Gifts:

• $19,000 per person (or $38,000 per couple) tax-free
• Useful but limited in impact for large estates

Large Lifetime Gifts:

• Best for leveraging the temporary $13.99M exemption
• Can be structured through irrevocable trusts
• Key concern: Capital gains—recipients inherit donor's cost basis, so asset choice matters

Michael explained the “step-up in basis”: assets transferred at death get revalued to market price, reducing capital gains. Strategic gifting must weigh this tradeoff.

Business Succession: A Planning Power Play

With business owners in mind, the panel addressed:

• Family involvement: Are heirs ready to lead?
• Equalization: If not all children are involved, how do you treat them fairly?
• Valuation discounts: Lack of marketability or control can reduce gift value for tax purposes.
• Sell vs. gift: Partial sales, installment payments, and GRATs (Grantor Retained Annuity Trusts) offer alternatives.

Rachel emphasized this often takes 3–5 years of planning.

Probate vs. Trust: The Hidden Cost of Doing Nothing

Rachel clarified:

• Wills ≠ Probate Avoidance: A will requires court oversight.
• Revocable Trusts = Control, Privacy, and Probate Avoidance

Leonetta added:

• Probate = Public record
• Trusts = Private documents, not accessible without legal standing

"If privacy and efficiency matter to you and your heirs, you want a revocable trust."

The GST Exemption: A Critical but Overlooked Tool

Michael explained:

• The Generation-Skipping Transfer (GST) exemption equals the estate exemption but is not portable
• If unused during life, it’s gone forever
• Used in GST-exempt trusts, it allows tax-free transfers to grandchildren and beyond

Rachel added that compliance is key—improperly structured trusts can trigger unexpected taxes.

Summary: Key Takeaways

What’s Next: June 4th—Part 2

The panel will reconvene on June 4 to discuss in-depth estate tax minimization strategies, including trust mechanics, gifting plans, and state-specific considerations.

Stay tuned on our Facebook and LinkedInpages for registration, and bring your questions—this series is designed to empower you to make impactful decisions for your estate, family, and future.