As 2025 unfolds, family offices must navigate a rapidly shifting landscape filled with both challenges and opportunities. Here are six critical issues to keep in mind this year.
1. Estate and Gift Tax Exemptions: Will the Increased Limits Remain?
The IRS has raised the lifetime estate and gift tax exemption to $13.99 million per individual ($27.98 million for married couples) in 2025. This allows those who maximized their 2024 exemption to gift an additional $380,000 per individual ($760,000 per couple) without incurring gift taxes. However, unless Congress intervenes, these exemptions are set to be cut in half starting in 2026. Given the uncertainty, families should work with estate planners to maximize their exemptions before they potentially shrink.
2. Buy-Sell Agreements and Succession Planning
Family businesses risk instability if ownership transitions are not planned properly. A buy-sell agreement ensures that if an owner exits due to death, disability, or retirement, their shares are transferred according to a prearranged plan rather than being sold outside the family. A recent Supreme Court ruling (Connelly v. United States) has implications for buy-sell agreements funded by life insurance, making it crucial for business owners to review their agreements and consider alternative structures like cross-purchase agreements.
3. Risks in Family Limited Partnerships (FLPs) and LLCs
A recent Tax Court case (Estate of Fields v. Commissioner) highlighted how improper structuring of family partnerships can lead to estate tax inclusion of transferred assets. This case serves as a warning that poorly executed FLPs and LLCs can negate tax benefits and even create additional tax liabilities. Proper planning and compliance with tax regulations are essential.
4. Heightened IRS Scrutiny on Asset Valuations
The IRS has become increasingly aggressive in challenging asset valuations for gift tax purposes. Recent legal rulings suggest that modifications to trust structures, such as adding tax reimbursement clauses or early termination of certain trusts, could lead to unexpected tax consequences. Families should work with tax advisors to ensure valuations and trust modifications comply with evolving IRS interpretations.
5. Corporate Transparency Act (CTA) and Reporting Changes
The enforcement of the Corporate Transparency Act (CTA) has shifted, with U.S.-based companies and citizens now exempt from reporting requirements. However, foreign entities registered to do business in the U.S. must still comply with beneficial ownership reporting obligations. While legislative efforts are underway to delay reporting deadlines, companies should stay informed and ensure compliance with any new rules.
6. AI’s Growing Role in Estate Planning
Artificial intelligence is revolutionizing estate planning by assisting with document drafting, legal summaries, and client communication. However, professionals must remain cautious, particularly regarding data privacy and the risks of over-automation. While AI can enhance efficiency, estate planning remains a deeply personal field that relies on human expertise and client relationships.
By staying proactive in these areas, family offices can effectively manage risks and capitalize on opportunities in 2025.
