ARTICLE: Estate Planning Tips When You Near the Tax Limits

Estate Planning Tips When You Near the Tax Limits

Did you know that the estate tax exemption, currently set at $11.7 million for singles and $23.4 million for married couples, is set to expire in 2026? The current administration, however, has signaled a desire to reduce the exemption, though no one knows exactly when that might happen or how low the exemption might go. This uncertainty means that anyone with more than $5 million in assets may want to maximize life-time giving while minimizing taxes. 

1. Maximize gifts under the Annual Exclusion each year. A grantor can give up to $15,000 a year per giftee without having to pay gift taxes. If an individual has one child who is married, and three grandchildren, they could give $75,000 a year without having to pay taxes on the gift. 

2. Donating to charity can be doubly beneficial for avoiding estate taxes and supporting philanthropic endeavors. Donating assets like stocks directly to charity can also avoid capital gains tax, while donating the required minimum distribution from a retirement account will also reduce income tax liability. 

3. Donor-advised funds are flexible accounts designed exclusively for charitable giving. Donors make a tax-deductible contribution into the fund, which grows tax free, and then the donor can make distributions from the account to any qualified charity in any amount and at any time. 

4. A charitable split-interest trust allows for a charity to benefit either from distributions during the donor’s lifetime, with the remainder going to non-charitable beneficiaries after the donor passes, or the initial beneficiary is non-charitable, such as the donor or a family member, but the remainder at the end of the trust is donated to charity. 

5. A grantor-retained annuity trust, or GRAT, is another type of irrevocable split-interest trust. Once assets are transferred into the GRAT, the assets are not counted as part of the estate, but the grantor receives an annuity payment from the trust for a specified number of years. Income tax must still be paid on the annuity, but it is at a lower rate than the estate tax. Once the GRAT terminates, the assets can transfer to a beneficiary or fund another GRAT. 

For assistance developing a strong estate plan that considers potential tax implications, please contact our office to schedule a meeting time.

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We at Roth Elder Law, PLLC, believe in providing services in a way that clients can easily understand and meaningfully participate in designing and maintaining their estate plan for their loved ones, as well as be assured that their plan will be administered according to their wishes.