What Advisors Need to Know About Estate Planning in 2025

This summer marked a significant moment for estate planning. Legislation passed in July raised the federal estate and gift tax exemption to $15 million per individual, or $30 million per married couple, starting in 2026. For high-net-worth individuals, this change eases the pressure to make large gifts before the previously scheduled drop in exemption, offering more time to plan with intention, whether they choose to gift now or preserve assets for future transfer.

Why Planning Still Matters

While the new exemption brings some relief, it doesn’t eliminate potential risks. Legislative changes could still shift the landscape, leaving older estate plans misaligned with today’s realities. With that in mind, revisit those plans and confirm that the following foundational documents are in place:

• Will: Advisors can play a key role in ensuring a will reflects the client’s full financial picture and that it integrates with other elements of the estate plan. This includes guiding clients to appoint an executor based on trust and capability — someone with the judgment and organizational skills to manage complex responsibilities and family dynamics.
• Power of Attorney (POA): A POA empowers a designated individual to manage a client’s financial or healthcare decisions in the event of incapacity. Without it, families may be forced to navigate court proceedings to gain authority — often during moments of crisis. Advisors should ensure clients understand the scope and strategic implications of their POA arrangements.
• Health Care Proxy: This legal designation authorizes a trusted individual to make medical decisions on behalf of the client in the event of incapacity. Advisors should ensure clients have selected proxies who understand their values and preferences, particularly in complex or emotionally charged scenarios.

Avoiding Frequent Wealth Transfer Mistakes

Even with a higher federal estate and gift tax exemption, several pitfalls remain. The most significant is having no plan at all, which can lead to confusion, conflict, and unintended outcomes. Another common issue is underestimating future needs for long-term care and lifestyle expenses. Finally, a lack of coordination among estate planners, tax professionals, and financial advisors can result in fragmented strategies that fall short of the client’s goals.

Helping Clients Build a Financial Legacy That Lasts

Legacy planning and transferring wealth are not created equal. Legacy planning is about helping clients articulate and preserve their values. Advisors are uniquely positioned to guide these conversations, drawing on their holistic understanding of clients’ financial lives to ensure the plan reflects long-term vision and intent.

Trusts: The Backbone of Legacy Planning

Trusts offer control, privacy, and flexibility in how assets are managed and distributed — during life and after death. They can help minimize estate taxes, avoid probate, protect assets from creditors, and ensure that wealth is transferred in alignment with a client’s values and intentions. Trusts are essential tools to craft personalized legacy plans that reflect family dynamics, philanthropic goals, and long-term financial strategies. Below are three key categories to consider:

Philanthropic Trusts

These trusts support charitable giving while offering tax advantages and legacy-building opportunities.

• Charitable Remainder Trust (CRT): An irrevocable trust in which the donor receives an income stream for a set period. Once the trust term ends, the remaining assets are transferred to a designated charity.
• Charitable Lead Trust (CLT): The opposite of a CRT. This trust provides payments to a charity for a set term, after which the remaining assets pass to the donor's heirs.

Personal Trusts

Personal trusts offer clients greater control over how their assets are distributed to family members or other beneficiaries, often with enhanced privacy and efficiency.

• Revocable Living Trust: Clients stay in control. They can change or cancel the trust anytime, making it flexible for life’s twists. Bonus: It helps assets skip probate and supports planning in case of incapacity.
• Irrevocable Trust: Clients use these trusts to move assets out of their estates, potentially reducing estate tax but also as a means of controlling future distributions and shielding wealth from creditors.
• Special Needs Trust: This trust safeguards a loved one with a disability, without risking their eligibility for government benefits. It ensures long-term care and financial support while preserving access to programs like Medicaid and SSI.

Strategic Gifting: Reduce Taxes, Increase Impact

Gifting isn’t just for ultra-high-net-worth clients; it’s a versatile strategy that can benefit households across the wealth spectrum. For example:

• Annual exclusion gifts: Clients can gift up to $19,000 per recipient annually, tax-free. Married couples can combine exclusions to gift up to $38,000. These gifts reduce the size of the taxable estate and can be used strategically over time.
• Applicable exclusion: Gifts above the annual limit tap into the $13.99 million applicable exclusion. This amount, which will increase to $15 million in 2026, can be used either during life or at death. During life, it’s a powerful way to transfer wealth while minimizing estate taxes on future growth of the assets. If saved until death, the exclusion provides a “free” step-up in cost basis on appreciated portfolios.
• Direct payments: Direct payments for a person's tuition or medical expenses are not considered taxable gifts, regardless of the amount. These payments are not subject to the annual exclusion limit.

These strategies can be used during both the accumulation and decumulation phases, allowing families to shape their legacy over time. It’s critical that financial advisors keep up with legislation changes that can impact their clients. It’s also advisable to consult with qualified legal professionals to ensure your strategies are current with federal tax laws and consider any state-level estate or inheritance taxes.

What Inheritors Should Know

Estate planning doesn’t end with the transfer. For surviving spouses and the next generation, thoughtful planning is key:

• Surviving spouses may benefit from a deceased spouse’s unused exclusion, creating opportunities for lifetime planning.
• Next-gen inheritors should consider lifestyle needs, tax implications, and trust structures to preserve wealth across generations.

Final Thoughts: Legacy is More Than a Number

The expanded estate tax exclusion is a powerful planning opportunity, but only if used wisely. A regular review of estate plans can ensure alignment with goals.

Remember: Legacy planning is about more than money; it’s about creating meaning. LPL Financial advisors can help clients build legacies that are protected, purposeful, and enduring.

Tara Popernik, CFA®, CFP®, a member of the LPL Spokesperson Council, simplifies complex financial topics — from estate planning and tax strategies to the evolving needs of today’s investors. Follow Tara on LinkedIn.