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Financial Planning > Trusts and Estates > Trust Planning

To Hedge Against Estate Tax Exclusion Changes, Try Disclaimers

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What You Need to Know

  • The Tax Cuts and Jobs Act doubled the estate tax exclusion in 2018.
  • In 2026, the exclusion is set to revert to the old, 2017 level, adjusted for inflation.
  • A disclaimer trust may help a surviving spouse cope.

Lloyd Lofton has an idea for how to help wealthy clients cope with the Year 2026 problem: Make sure you — and they — know great trust and estate lawyers.

Estate tax exclusions might, or might not, return to the old (lower) 2018 levels on Jan. 1, 2026.

Lofton mentions one possible solution, the disclaimer trust, in an upcoming commentary provided to ThinkAdvisor.

“An example of someone who would benefit from a disclaimer trust is an individual who wants to maintain flexibility in estate planning,” Lofton said in the commentary.

The Marietta, Georgia-based sales coach said that, under current rules, the surviving spouse can use a disclaimer trust to adapt to changes in estate tax rules or other conditions.

What It Means

Because of uncertainty about the future of the estate tax rules in the federal Tax Cuts and Jobs Act of 2017, you may need to dust off guides to estate planning and take your favorite trust and estate lawyers out to lunch.

Estate Taxes and the Tax Cuts and Jobs Act

Estate and gift taxes accounted for $33 billion of the U.S. federal government’s $4.9 trillion in revenue in 2022, according to White House budget analysts.

In 2017, an individual could exclude $5.49 million from federal estate taxes, and a couple could exclude $10.98 million.

In 2018, the Tax Cuts and Jobs temporarily doubled the exclusion limits. For 2023, the inflation-adjusted exclusion limits are $12.92 million for an individual and $25.84 million for a couple.

On New Year’s Day 2026, if Congress does not extend the TCJA estate tax changes, the exclusions could revert to the 2017 levels, adjusted for inflation, or about $6 million for an individual and $12 million for a couple.

The Committee for a Responsible Federal Budget includes an explanation of why Congress might let the estate tax exclusion increase sunset in its new interactive federal debt fixer tool.

The committee estimates that Congress needs to come up with $6.7 trillion in spending cuts and extra revenue, spread over a 10-year period, to stabilize the federal debt by 2033.

The debt fixer tool shows that letting the estate tax exclusion return to $5 million for an individual and $10 million for a couple could add $120 billion in revenue.

Disclaimer Trusts

A trust is an arrangement that gives one party, or trustee, the ability to hold and manage assets on behalf of one or more beneficiaries.

When a client adds a disclaimer trust to a will, the trust will be funded if and only if the client’s spouse “disclaims,” or rejects, part or all of the assets left by the client when the client dies. The rejected assets then flow into the disclaimer trust.

The surviving spouse can use the provision to keep enough of an inheritance to pay the bills while tailoring the amount received to reflect the conditions in effect when the client dies.

Lofton is not the only financial professional who has noticed that a disclaimer trust might be useful at a time when federal estate tax rules appear to be subject to change.

Trust & Will and the Fidelity wealth management team also have proposed the use of disclaimer trusts as a response to estate tax exclusion uncertainty.


Patrick Hicks, Trust & Will’s head of legal, said in that firm’s discussion of the topic that using a disclaimer trust could lead to problems for a spouse who might miss a disclaimer execution time deadline or who might have conflicts with the children who could end up with the cash in the disclaimer trust.

In the past, trust law specialists warned that estate planners had to pay close attention to the assets used together with the disclaimer trust. Some suggested that clients could run into problems if the disclaimer trust planning strategy clashes with the beneficiary designations in life insurance policies used together with a disclaimer trust.

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