Notable Estate Planning Legislation

No matter the time of year, taxes are always a hot topic. While we usually think about taxes in terms of how they affect us today, it can be equally important to understand the history of tax laws that impact estate planning.

The Estate and Gift Tax

Taxation of property transfers at death dates as far back as 700 BCE in ancient Egypt. It was also used in Rome and feudal Europe.

The United States estate tax was introduced in 1916. It was advocated by progressive reformers during a time of great wealth concentration and inequality (think Gilded Age figures like Carnegie and Rockefeller). An initial exemption, or exclusion amount, of $50,000 was allowed.

In the decades since, Congress has made important additions and revisions to the estate tax structure that reflect cultural debates about wealth distribution, economic stimulus, and government revenue.

Key developments include:

1932: Introduction of the tax on inter vivos (lifetime) gifts to prevent avoidance of the estate tax.
1948: Creation of the marital deduction, allowing tax-free transfers to surviving spouses.
1976: The Tax Reform Act unified the estate and gift tax exemption.

The exclusion has increased over time:

1916: $50,000
2006: $2 million
2017: $5.49 million
Today (2025): $13.99 million for individuals and $27.98 million for married couples

The annual gift tax exclusion has risen from $3,000 per person in 1976 to $19,000 per person today.

Unless Congress acts, current exemption amounts will revert to lower pre-TCJA levels in 2026.

The Income Tax

While estate and gift taxes impact individual estate planning, they account for only about 1% of federal revenue. In 2023, just 0.14% of estates were taxable.

In contrast, federal income tax represents about half of all government revenue.

The U.S. implemented a permanent federal income tax in 1913, when the Sixteenth Amendment gave Congress authority to tax income. Rates began at 1–7% for incomes above $3,000. Over time, tax rates fluctuated dramatically, peaking at 94% in 1944 during WWII—the same year Congress introduced the standard deduction.

Significant income tax changes include:

1975: Introduction of the Earned Income Tax Credit (EITC)
1986: The Tax Reform Act simplified the code and lowered top rates
2012: American Taxpayer Relief Act set top rate at 39.6%
2017: The Tax Cuts and Jobs Act (TCJA) temporarily lowered rates and permanently dropped the corporate tax rate

The Future Impact of Taxes on Estate Plans

Surveys show that voters favor permanently extending the TCJA. President Trump and congressional Republicans have expressed support for extensions.

Historically, major tax bills are passed late in the year—TCJA was signed just days before Christmas 2017.

Whether Congress acts before 2026 or delays until the last minute, financial advisors should prepare contingency plans for clients—addressing estate tax exemptions and individual tax rates under both current and pre-TCJA scenarios.

Coleman Law can help you as you plan your legacy. We would love to talk to you about how we can help you in this process. Click here to request your free consultation today!

Notable Estate Planning Legislation

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