Planning for the Upcoming Estate Tax Changes: A Call to Action for Franchisees

Are you aware that in 2026, the estate tax credit will dramatically drop from a staggering $13.6 million to just $5 million per individual? For franchisees with high-value business holdings, this impending change could have significant ramifications on how much wealth you can protect from taxes. The clock is ticking as the Tax Cuts and Jobs Act (TCJA) sunsets, reducing key tax advantages. Current credits offer a crucial opportunity, but that window is closing fast. If you own multiple franchises or possess substantial assets, now is the time to act decisively and secure your financial future.

Understanding the TCJA Sunset

The Tax Cuts and Jobs Act, passed in 2017, brought forth a monumental increase in the estate tax exemption, allowing individuals to pass on up to $13.6 million tax-free, while couples could protect nearly $27 million cumulatively. For multi-unit franchisees, this presented a unique occasion to transfer wealth and business assets with dramatically lower estate tax implications.

However, these benefits are not permanent. In 2026, the estate tax exemption is set to revert to $5 million per individual, adjusted for inflation. This rollback means franchisees with considerable holdings could face notably higher estate tax liabilities if they do not seize the current exemptions while they still can.

Act Now to Secure Your Wealth

With the estate tax exemption on the chopping block, the message is clear: use it or lose it. Franchisees who delay action run the risk of missing out on substantial tax-saving opportunities. Strategic gifting—where you transfer portions of your wealth to heirs or in trust—is a highly effective way to reduce your taxable estate. By transferring assets today, you lock in the current exemption, keeping more of your hard-earned business wealth out of the IRS’s reach.

Procrastination is not your friend. Waiting until 2025 to begin planning could result in hasty, poorly thought-out decisions, especially as more business owners scramble to take advantage of the existing tax structure. As a multi-unit franchisee, your circumstances come with added complexity. Factors like business valuations, legal implications, and asset structuring require expert oversight and thoughtful planning. Starting your estate planning process now will shield you from the last-minute rush and ensure that you can thoughtfully strategize your financial legacy.

Unique Challenges for Franchisees

Multi-unit franchisees face unique challenges when it comes to estate planning. Unlike traditional business owners who might focus solely on a single company, franchisees often manage a blend of physical assets, intellectual property, and contractual obligations—all of which complicate tax planning significantly.

One critical step in this process involves obtaining accurate business valuations. Whether you oversee five, ten, or a hundred franchise locations, understanding the true value of your holdings is essential for avoiding unwelcome tax liabilities. Furthermore, placing assets into trusts can offer considerable tax advantages while allowing you to maintain greater control over how your wealth is distributed posthumously.

Selling non-essential business assets to free up liquidity for gifting can also be an effective approach to reduce your taxable estate—but it requires careful consideration and negotiation. By planning ahead, you can explore options like trusts, gifting, or even selling portions of your franchise operations to protect your financial legacy. Delaying such actions could result in forfeiting valuable opportunities and incurring an increased tax burden.

Preparing for an Uncertain Future

While the 2026 estate tax changes are currently on the schedule, it’s important to acknowledge that the political landscape is ever-changing. The outcomes of the 2024 election could have significant implications for future tax policies. Decisions made in Congress or by the administration could either extend current exemptions or enforce stricter limits.

The stakes are especially high for franchisees. Potential increases in capital gains taxes could impact the sale of franchise locations, while changes in tariffs or corporate tax rates may disrupt everyday operations. Your best strategy is to prepare for worst-case scenarios—higher taxes and fewer exemptions—while keeping your plans flexible enough to adapt to new legislative realities.

Protect Your Empire Today

If you haven’t started your estate planning process, now is the time to act. Waiting any longer may lead to costly errors, especially as financial advisors, estate planners, and attorneys become inundated with frantic clients eager to beat the 2026 deadline.

Here’s what you can do today:

1. Meet with Your Advisors: Collaborate with your succession planner, tax specialists, and legal team to assess your current financial standing and devise strategies aimed at minimizing future tax burdens.

2. Consider Gifting: Take advantage of the current $13.6 million exemption by gifting assets or transferring them into trusts, thus shielding your franchise empire from impending tax hits.

3. Review Business Valuations: Accurately valuing your franchises is vital for avoiding scrutiny by the IRS and maximizing the efficacy of your estate plan.

4. Stay Flexible: Keep your estate planning adaptable to possible shifts in the political landscape. Changes following the 2024 election could drastically alter the tax framework, and readiness is essential.

The 2026 tax law changes are looming, presenting multi-unit franchisees with a narrowing window to secure their wealth. Begin planning today to ensure that your franchise holdings continue to thrive for future generations, irrespective of the turbulence in the political and economic climate.

For deeper insights, consider joining the conversation between Champ Rawls, a seasoned succession planner, and Doug McCullough, a talented attorney, as they discuss proactive steps in protecting your assets before the tax law shifts take effect.

While the 2024 election may bring unpredictable exciting developments, one truth remains clear: the current tax laws offer a fleeting opportunity that multi-unit franchisees must seize. This is not merely about adapting to changes in tax law; it is an urgent call to action. Start your estate planning today and protect the future of your franchise empire before the 2026 deadline approaches.

For customized support, visit seekingsuccession.com or connect with Kendall Rawls, a second-generation family member at Rawls Succession Planners, at [email protected] for invaluable insights. Together, let’s ensure your business legacies endure through generations.