Estate Tax Exemption Sunset: What Texas and Florida Families Need to Do Now

There is a tax deadline approaching that most families have never heard of — and unlike a filing due date, this one cannot be extended. When key provisions of the Tax Cuts and Jobs Act (TCJA) expire at the end of 2025, the federal estate tax exemption is projected to drop by roughly half. For families in Texas and Florida who have spent years building wealth, that shift could mean a significant tax bill for the people they love most.

This article is not meant to alarm you. It is meant to inform you — and to help you understand why now is the time to take a careful look at your estate plan.

The federal estate tax is a tax on the transfer of wealth at death. But not every estate owes it. The government sets an exemption — a threshold below which no federal estate tax applies. The TCJA, enacted in 2017, approximately doubled that exemption. In 2024, the federal estate tax exemption is $13.61 million per individual, or $27.22 million for a married couple. Estates valued below these amounts generally pass to heirs free of federal estate tax.

When TCJA provisions sunset on January 1, 2026, the exemption is expected to revert — adjusted for inflation — to approximately $7 million per individual, or roughly $14 million per couple. The tax rate on amounts above the exemption remains 40%. That is a meaningful change for a wide range of families, not just the ultra-wealthy.

This is where many people are surprised. You do not need a nine-figure net worth to be affected by this change. Consider a Texas family with a paid-off home, a small business, retirement accounts, and life insurance. When you add those assets together — including the death benefit of a life insurance policy, which is typically included in your taxable estate — the total can exceed the post-sunset threshold more quickly than you might expect.

Real estate appreciation in major Texas and Florida markets has been significant over the past decade. Business owners, in particular, face unique exposure because business interests are often illiquid — meaning heirs may struggle to pay a tax bill without being forced to sell the business itself. Understanding your current estate value is the essential first step.

There are several estate planning tools that attorneys commonly discuss in this context. The following is an educational overview — not legal advice — and each strategy should be evaluated with a qualified attorney based on your specific circumstances.

Lifetime gifting. Under current law, individuals can make gifts up to the exemption amount during their lifetime without triggering gift tax. Transferring assets now — while the exemption is elevated — may allow you to remove wealth from your taxable estate before the threshold drops. The IRS has confirmed that gifts made under the current, higher exemption will not be “clawed back” if the law changes.

Irrevocable trusts. Tools such as Spousal Lifetime Access Trusts (SLATs), Irrevocable Life Insurance Trusts (ILITs), and Grantor Retained Annuity Trusts (GRATs) are structures that attorneys use to move assets out of a taxable estate while preserving certain benefits. These are sophisticated arrangements that require careful drafting and proper funding to function as intended.

Annual gift tax exclusion. Separately from the lifetime exemption, you may gift up to $18,000 per recipient in 2024 without using any of your lifetime exemption. For families with children and grandchildren, this can be a meaningful ongoing strategy.

Portability elections. When a spouse passes away, a surviving spouse may be able to “port” the deceased spouse’s unused exemption — but this requires a timely estate tax return filing even when no tax is owed. Missing this deadline can have lasting consequences.

Business succession planning. Business owners should review whether their ownership structure and succession plan account for potential estate tax exposure. Valuation discounts, buy-sell agreements, and family limited partnerships are among the tools that may be relevant, depending on the situation.

One genuinely positive factor for residents of Texas and Florida: neither state imposes a state-level estate tax or inheritance tax. This means the federal exemption is the only threshold that matters for most families in these states. That said, the federal tax alone can be substantial, and the absence of a state tax should not be mistaken for an absence of risk.

Texas residents should also be aware that community property rules affect how assets are owned and transferred between spouses — something that interacts with federal estate planning in important ways. An attorney familiar with both Texas community property law and federal estate tax planning can help ensure your plan accounts for both.

Some clients ask whether they should wait to see if Congress extends the TCJA provisions. It is a reasonable question. The honest answer is that legislative outcomes are uncertain, timelines for Congressional action are unpredictable, and certain planning strategies — particularly irrevocable trusts — take time to implement properly. Waiting until December to begin a process that may take several months is a risk in itself.

The current exemption is, in practical terms, “use it or lose it.” Proactive planning preserves options. Delay narrows them.

If you are uncertain whether this change affects you, the most valuable thing you can do right now is schedule a consultation with an estate planning attorney. A review of your current estate value, existing documents, and goals can help you understand your exposure and your options — before the window closes.

Fleurinord Law is here to help. Our estate planning team works with Texas and Florida families to build plans that protect what matters most. Contact us today to schedule a consultation and learn what steps make sense for your situation. Visit us at yourtrustcounsel.com or reach out directly — we would be glad to hear from you.