On behalf of The Law Office of Wickersham and Bowers posted in Estate Planning on Thursday December 19th, 2024.
Estate planning is about more than just deciding who gets what. For the ultra-rich, estate planning involves making thoughtful choices to protect assets, reduce taxes, and ensure a smooth transfer of wealth to loved ones. Since tax liabilities can take a substantial portion of an estate, using advanced strategies can help minimize these costs.
Trusts
Trusts are one of the most effective tools for managing taxes in estate planning. Irrevocable trusts are especially useful because they remove assets from your taxable estate. This reduces the amount that could be taxed after death while also giving you control over how those assets are distributed.
For instance, an Irrevocable Life Insurance Trust (ILIT) keeps life insurance payouts out of the taxable estate. This means that your loved ones can receive the full amount of the policy without additional tax burdens.
Another helpful option is a Charitable Remainder Trust (CRT). This type of trust allows you to support a charity while also reducing your taxes. It provides you with income during your lifetime and sends the remaining assets to the charity later.
Gifting
Another way to lower tax liabilities is through gifting. You can take advantage of the annual gift tax exclusion, which lets you give up to $19,000 per person in 2025 without paying taxes on it. These gifts can include money, assets, or even covering medical or educational expenses directly. Over time, this strategy significantly reduces the overall value of your taxable estate.
If you have business assets, a Family Limited Partnership (FLP) could be a good choice. This structure lets you transfer parts of your business to family members at a reduced tax value, lowering the taxes owed on those gifts.
Business Planning
High-net-worth business owners should consider creating a succession plan. Tools like Limited Liability Companies (LLCs) and buy-sell agreements can help transfer business ownership without hefty taxes. These steps protect the business’s value and ensure it stays in the family.
Start Planning for Your Future
Advanced estate planning aims to create a lasting legacy and protect your loved ones. If you are ready to take the next step, contact Wickersham & Bowers today to get started.
