Estates in the mid- or higher end of the range might want to consider “estate freeze” tactics. These include stepping up annual gifting using the annual gift exclusion, using life insurance to remove funds from the estate, introducing more charitable giving, and using more advanced irrevocable trusts including grantor retained annuity trusts (GRATs), defective grantor trusts and dynasty trusts.
This second group of wealthy clients must be careful with lifetime gifting, because any of the exemption used during one’s life is subtracted from the available exemption at death. If a client made a $5 million gift now, for example, and when they die the exemption is $7 million, that means just $2 million of exemption remains, not the higher amount that might be remaining now. Someone in this situation could still end up owing estate tax.
An Additional Suggestion
While not a concrete estate-planning strategy, here’s another year-end idea. Gatherings can be a time to introduce or reintroduce the idea of estate planning broadly and perhaps set up a time early in 2024 to talk about specifics. Especially for those gathered at a cherished vacation home or crossing the country to see mom and dad, why not ask questions about how the vacation home can stay in the family for generations or remind parents that you may not be available at the drop of the hat to manage their estates. The holiday season can make planning for the future a positive activity, not one to dread.
Keven DuComb, JD/MBA, is senior financial planning and estate specialist at Altfest Personal Wealth Management, a $1.6 B RIA and an estate planning consultant to FP Alpha, a wealthtech platform that combines artificial intelligence and human expertise in taxation, estate planning and insurance to empower financial advisors in delivering customized advice to clients.