Written by: Chelsea Spears, Farmers National Bank
The Tax Cuts and Jobs Act (TCJA), passed in 2017, created the largest overhaul of tax code that the U.S. has seen in decades. Those provisions, however, were meant to be temporary and by the end of 2025, several provisions are set to expire.
Mark Munson, Senior Vice President and Chief Fiduciary Officer for Farmers Trust Company, has 27 years of experience in the financial services industry with a focus on Trust Services and Estate Planning. In this Q&A, he shares his expertise so that you can plan now for possible tax changes.
Mark, you’re an experienced Fiduciary and trusted wealth advisor. What are you seeing right now in the industry?
Mark Munson: A hot topic being raised by prospects and clients revolves around the uncertainty with respect to changes in the tax laws. The current tax laws in place at the Federal level are scheduled to sunset at the end of 2025. That has people worried and wondering, ‘Should I be giving money away now? Should I be setting up a Trust? What should I be doing in anticipation?’
So what should people be doing in anticipation?
Munson: The current estate and gift tax exclusion amount is $13.61 million, per person. Absent action from Congress, as of January 1, 2026, the exclusion amount is likely to drop to somewhere north of $5 million, likely between $6.4 and $8.4 million because it is indexed for inflation. So people who are serious about taking advantage of the current exclusion amount should avoid the 2025 year-end rush. At the same time, it is important to monitor any action on the part of Congress. Talk to your advisors. Hopefully that’s us here at Farmers, we are certainly monitoring the situation. If you work with an accountant or with an outside attorney – see what they're thinking as well. It doesn't hurt to get their thoughts, and then we can always coordinate with them in providing the best advice for that particular client.
Do you have any blanket advice before these potential changes go into effect?
Munson: Well, every client is different. The amount they've accumulated in their lifetime isn’t the same. We want to help all of them to the best of our ability. Farmers Trust has ideas that can help people, which may include outright gifts, establishing trusts or involving your favorite charity or charities as a part of your overall plan. Will the exclusion amounts change or be extended? We want to remain flexible enough that we can meet people's ongoing needs depending upon any changes that might come next year.
It seems nothing is set in stone with the tax laws just yet. Based on your expertise, do you have any predictions on what will happen?
Munson: It’s always dangerous to predict, because you never know what the government will do. This is an election year. We’ll have to see who is sitting in the White House come January and the make-up of the House and Senate. But I will say this: With respect to Federal estate taxes – there are a very small percentage of estates that actually even have to file a Federal estate tax return and an even smaller percentage that pay any actual estate tax. My prediction is that either the current laws will be extended or they will be revised in a way that continues to give people a substantial amount of money that they can pass on and not worry about Federal estate and gift taxes.
Is there anything that people in Pennsylvania specifically need to be aware of with the sunset?
Munson: Let’s say your estate is upwards of $5 million. The current exemption amounts protect those people from Federal taxes. Even absent action by Congress before the end of next year, those people should have little to worry about when it comes to Federal estate and gift taxes. But here in Pennsylvania, we have a separate death tax – the Pennsylvania Inheritance Tax. While it can be difficult to completely avoid that inheritance tax, we have clients who are wondering, ‘What's that going to mean to me? What can I expect to come out of my estate and go to the Pennsylvania Department of Revenue?’ We see that concern, and we can help address that concern, with proper planning.
We also see clients with more significant wealth who are worried about the Federal taxes. For a married couple, it is critical to title things correctly, allowing each spouse to take advantage of the exemption amount.
So we're seeing it at all levels. From relatively modest estates to very wealthy estates and everything in between. They all have valid concerns about the tax bite.
How can Farmers Trust Company help people in the midst of this uncertainty?
Munson: One of the things that impressed me most when I started working at Farmers is the attention to service and attention to the client. People have a lot of options today as to where they go for financial advice. But at Farmers Trust, we have a history of being very involved with the client. We want to be the person who they know that can come to, and rely upon, to discuss any change they're considering or any planning they're going to be doing. At Farmers, the client knows who they’re going to talk to about a particular issue and they have the confidence that they will be serviced in their geographic area. Because of our knowledge and expertise, and because so many of our advisors are well-credentialed, we are in a great position to really be that individual, and be that company, that people can look to and with whom they can build a relationship.