The 2025 Sunset
Some upcoming changes less than 18 months away
Good morning,
Many of you know my severe allergic reaction to anything that smacks of a forecast.
And while things can and likely will change, there are a couple of potential planning items on the horizon you should be aware of…
First, starting in 2025 price caps will be implemented on prescription drugs.
For those on Medicare, under the current proposed changes, there will be a $2,000 per year cap on your out-of-pocket prescription costs.
For more, read this:
With Medicare open enrollment starting in mid-October, it’s smart to review your Medicare coverage regularly and your Part D drug plan annually as premiums, co-pays, and drug formularies change from year-to-year.
There’s also a “sunset” coming in 2025.
Your individual income tax rates will go back to their 2017 levels.
The standard deduction will essentially be cut in half.
The Federal estate tax exemptions will be reduced. More on that below.
Here’s a good overview of the coming changes from the Tax Policy Center:
The current taxable estate limits, set by the Tax Cuts and Jobs Act of 2017, have impacted the level of wealth that results in a taxable estate at the Federal level.
In 2025, these limits are scheduled to revert (or sunset) to their pre-2018 levels, decreasing the Federal estate tax exemption. The limits are reducing from 8 figures to 7 figures.
That’s a lot of money in either case.
For most of you, this won’t result in a meaningful change with your estate planning.
The current Federal estate tax exemption is $12.92 million per person. Twice that amount for a married couple.
In 2025, this exemption amount reduces to $6.40 million per person.
Again, likely not an issue for many of you.
But remember, your taxable estate is the sum total of everything you own. And while any life insurance you have goes to your heirs tax-free, the amount of your life insurance policy is included in your taxable estate.
So even if you’re not bumping up against these numbers, your estate may be larger than you think.
Which is why I’d like to remind you that estate planning isn’t only for the wealthy…
Regardless of your wealth, it’s smart to regularly review your estate plan to confirm that it still reflects your current wishes.
For example, if you have children over the age of 18 and they’re in a serious accident, you might not be able make decisions on their behalf.
Unless you have financial and healthcare powers of attorney in place where they’ve named you as their agent or representative.
There’s more to estate planning that your last will and testament…
If this is something you’d be interested in discussing, let me know. I can help.
The above are expected changes coming in 2025.
Of course, there’s a US Presidential election between now and then, so who knows what might happen or how these plans might be altered.
Yet another reason to regularly review your financial plan - which includes your income tax planning, health insurance planning, and your estate planning - to make sure you’re being proactive relative to changes in legislation, prescription costs, or the other changes we’ll eventually encounter in the future.
If you have any questions or would like to discuss your financial planning, hit reply and let me know.
Links & Things
If you haven’t wondered in the past if you should get out of the investment markets and wait for things to “settle down” you probably will. Just give it time.
But it’s dangerous to attempt to time the market. While you’re welcome to ask, I just won’t do it.
For more on this:
Once again, not only does Christine Benz write a great article, but it’s something I wish I’d written. And these are all points I could have written about my personal approach to money. Read it here:
Thank You!
I’m grateful to have you as a reader.
If you have any questions or an idea for a future newsletter, blog post, or YouTube video, I'd love your input.
Just hit reply - I read (and truly appreciate) every email you send.
Until next Wednesday,
Russ