Tax Director Authors Article for CityBusiness Jennifer Bordes, Tax Director at LaPorte, recently authored an article on estate planning for New Orleans CityBusiness. Jennifer is the leader of LaPorte's Estate Planning Services Group. Teaming with other estate planning professionals including attorneys, insurance agents, trust officers, and financial planners Jennifer takes a holistic approach to ensure that financial and non-financial goals are met. As she writes in her article, an important step in this process is doing an annual financial health check-up. The full version of the article can be viewed below. Significant Change to Federal Estate Tax Exemption Slated for January 1, 2026 by Jennifer Bordes, CPA, CSEP, MS But, now is the time to consider minimizing future estate tax liability. Having a solid estate plan in place is an important step in preserving your wealth for generations. A looming change in the Federal Estate Tax Exemption makes the need for a thoughtful plan even more pressing. When Congress passed the 2017 Tax Cuts and Jobs Act, they boosted the Federal Estate Tax Exemption, offering high-net-worth individuals a significant tax planning advantage. However, barring any changes from Congress, the estate tax exemption (which is currently $13,990,000 in 2025) is set to sunset at the end of 2025. Beginning in 2026, the federal estate tax exemption will be reduced to approximately $7,000,000 per person. The exemption eliminates federal estate taxes on amounts up to the threshold of $13,990,000 (currently) either (1) gifted to family members during your lifetime or (2) bequeathed to someone upon your death. The chart below shows an example of how the new estimated threshold could affect estimated taxes. Given the potential impact of this change, now is the time to engage in proactive estate planning. Gathering a team of professionals to assist in developing the right plan Selecting the proper transfer techniques Engaging valuation services to determine the value of assets Implementing the plan There are several advanced techniques that may help further preserve your wealth under the changing estate tax laws. Gifts: One of the simplest ways to reduce your estate tax liability is by making gifts during your lifetime. Gifting an asset with a currently depressed value can help remove future appreciation from your taxable estate. However, it is essential to consider that the recipient will inherit your income tax basis in the asset, which may have future tax implications. Sale to an Intentionally Defective Grantor Trust (IDGT) : An IDGT offers a more sophisticated wealth transfer strategy. You can sell appreciating assets to an IDGT in exchange for an installment note, effectively freezing the value of the asset in your estate. The trust then benefits from future appreciation, which is excluded from your estate. Properly structured, this sale has no immediate income tax consequences, and the interest payments on the note are not taxable to you. The installment note’s unpaid balance remains in your estate, but any appreciation beyond the interest rate remains in the trust, free from estate tax. This strategy also avoids triggering capital gains taxes on the sale if structured correctly. Grantor Retained Annuity Trusts (GRATs): A GRAT is an effective strategy for transferring wealth while retaining income for a set period. When you transfer an appreciating asset into a GRAT, you receive annuity payments for a specified number of years. If the trust’s assets outperform the IRS-mandated annuity rate, the excess appreciation passes to your heirs tax-free. The goal is for the appreciation to exceed the annuity payments, allowing you to transfer wealth with little or no gift tax consequences. Roth IRA Conversion: Although not traditionally viewed as an estate planning tool, converting a traditional IRA to a Roth IRA can be advantageous in the context of wealth transfer. With tax rates scheduled to increase in 2026, converting to a Roth now could lock in the current lower rates. You would pay the income tax on the conversion now, and future withdrawals from the Roth would be tax-free for both you and your heirs, making it a tax-efficient way to pass on retirement savings. Charitable Remainder Annuity Trust (CRAT): A CRAT allows you to support charitable causes while reducing your taxable estate. You can receive regular income payments from the trust during your lifetime, and the remainder passes to charity upon your death. This strategy is particularly effective when dealing with appreciated assets or in periods of high-interest rates. Qualified Personal Residence Trust (QPRT): A QPRT allows you to transfer ownership of your personal residence or vacation home to your heirs at a reduced gift tax value. You retain the right to live in the home during the trust’s term, and the gift value is calculated by subtracting the value of your retained interest from the current value of the home. Gift and estate planning is not a “one size fits all” approach. These are a few available options but it is not an exhaustive list, and an estate plan should be customized to fit your needs. Avoid the high cost of rushed planning and take advantage of your team of professionals to assist you in the planning process. In addition, keep an eye on the future administration for possible changes to the current laws in effect. Jennifer Bordes, CPA, is a tax director with LaPorte CPAs & Business Advisors, the largest independent accounting and business advisory firms headquartered in Louisiana. She concentrates her efforts in the gift, estate, and trust planning arena and focuses principally on serving closely held businesses, high net worth individuals, and family groups. She can be reached at jbordes@laporte.com.

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