This election could bring significant changes to estate, gift and generation skipping transfer tax exemptions. The potential result? A meaningful reduction in how much families can transfer to heirs tax free. Currently, the transfer tax exemptions (aka the amounts that can be transferred tax free) are $11.58 million per individual, or $23.16 million for a married couple. These exemptions are set to increase annually through 2025.

Importantly, on January 1, 2026, absent a change in tax law, these exemptions automatically revert to $5 million, indexed for inflation. However, the economic crisis caused by the coronavirus pandemic resulted in trillions of dollars of government stimulus spending. Additionally, the severe economic challenges have resulted in federal and state budget deficits. Many assume that taxes will have to increase to help pay for the massive stimulus measures and to shore up government coffers. Frankly, the current estate and gift tax exemptions may be on the chopping block, and well before 2026.

Keep in mind that this year’s election could speed up the rate and the degree to which the tax exemption amount is lowered (for example, reduced to $3.5 million in 2021). Though this is not the reality at the moment, families who could be affected should consider using their exemptions now as may become a “use-it-or-lose-it” scenario. Now is the best time to review your estate plan and potentially make gifts to utilize the current enhanced exemption. Every family is unique, so you should work with your financial and estate planning advisors to determine if, and how, you can take advantage of current exemptions.