With the future of the Tax Cuts and Jobs Act (TCJA) still up in the air and several major provisions set to expire after 2025, family offices need to stay ahead of the curve. Getting valuations done before the end of 2025 can help families make smart decisions, fine-tune their tax strategies, and possibly reduce the impact of upcoming changes in tax law.
The Tax Cuts and Jobs Act (TCJA) bumped up the amount you can give away or pass on without paying estate or gift taxes—but that boost is set to end after 2025 unless Congress steps in. If nothing changes, the limit will drop back to what it was before 2018, adjusted for inflation.
That means in 2026, the exclusion would be around $7 million for one person or $14 million for a married couple, which may cause uncertainty for those who have planned their estates around the current exclusion amount.
Here’s a breakdown of how the 2025 proposed extensions to the Tax Cuts and Jobs Act (TCJA) could impact family offices, and why getting a valuation before year-end 2025 is a strategic move:
Estate and Gift Tax Planning
- The current estate tax exemption (approximately $13 million per individual) is scheduled to sunset after 2025, potentially decreasing to around $6 million.
- Why valuation is important: A professional valuation of family businesses, real estate, and other assets enables families to take full advantage of the current higher exemption through strategic gifting before the threshold is reduced.
Pass-Through Entities (LLCs, LPs, S-Corps)
- The 20% Qualified Business Income (QBI) deduction remains a key tax benefit for family offices operating through pass-through entities.
- Why valuation is important: Knowing the value of these entities helps project tax exposure and allows for proactive restructuring ahead of any legislative changes.
Charitable Giving and Philanthropy
- If higher income and capital gains tax rates return, charitable giving could offer enhanced tax advantages.
- Why valuation is important: Accurately valuing appreciated assets—such as private equity or real estate—enables more efficient charitable contributions, particularly through donor-advised funds or private foundations.
Investment and Asset Allocation
- Proposed changes to capital gains taxation—such as reforms to carried interest—could significantly impact private equity and hedge fund strategies.
- Why valuation is important: Having up-to-date valuations allows families to assess unrealized gains and make informed decisions around tax-efficient liquidations, reallocations, or restructurings.
Family Governance and Succession
- Accurate valuations are essential for fair and transparent wealth transfers, particularly when dividing ownership interests or establishing trusts.
- Why valuation is important: A clear financial picture helps prepare the next generation, fostering engagement and understanding of the family’s assets and long-term strategy.
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