Preserving wealth ensures financial security and family legacy. Estate planning aligns asset distribution with your wishes while reducing taxes and legal hurdles.
Understanding Estate Taxes
Estate taxes can impact the wealth passed to heirs. Planning ahead is crucial.
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In 2025, the federal estate tax exemption is $13.99 million per individual ($27.98 million for couples).
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Amounts above the exemption are taxed up to 40%.
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Strategies to Reduce Estate Taxes:
- Lifetime Gifting: Transfer wealth tax-free using the $19,000 annual gift tax exclusion (2025).
- Spousal Portability: Apply an unused exemption from one spouse to the surviving spouse’s estate.
- Charitable Giving: Reduce taxable estate through donations or charitable trusts.
Trusts: The Foundation of Estate Planning
Trusts are invaluable for managing wealth, avoiding probate, and securing tax advantages.
- Types of Trusts:
- Revocable Living Trusts: Flexibility during your lifetime and seamless asset transfer after death.
- Irrevocable Trusts: Remove assets from your taxable estate and offer creditor protection.
- Generation-Skipping Trusts (GSTs): Minimize estate taxes when transferring wealth to grandchildren.
- Specialized Trusts:
- Qualified Personal Residence Trusts (QPRTs): Transfer homes at reduced tax values.
- Grantor Retained Annuity Trusts (GRATs): Retain income while minimizing gift taxes.
Wealth Transfer Strategies
Effective wealth transfer requires strategic financial and tax planning.
- Lifetime Gifting:
- Use lifetime estate tax exemptions for larger gifts.
- Gift appreciating assets to shift future growth outside your taxable estate.
- Family Limited Partnerships (FLPs):
- Gradually transfer ownership in businesses or properties while maintaining control.
- Insurance-Based Strategies:
- Irrevocable Life Insurance Trusts (ILITs): Remove life insurance proceeds from the taxable estate.
- Use permanent life insurance to pass wealth tax-free.
Planning for Business Succession
For families with businesses, succession planning is essential for smooth transitions. Professional guidance balances family dynamics and business interests.
- Buy-Sell Agreements:
- Outline ownership transfer terms for retirement, disability, or death.
- Funded by life insurance, they provide liquidity for buyouts.
- Family Limited Liability Companies (FLLCs):
- Gradually transfer ownership while retaining control.
Wealth Preservation Through Protection
Safeguarding assets from creditors and legal disputes is critical.
- Tools for Protection:
- Domestic and Offshore Asset Protection Trusts: Protect assets while maintaining control.
- Homestead Exemptions: Shield primary residences under state laws.
Proactive measures safeguard wealth for future generations.
Healthcare and Legacy Planning
Estate planning extends beyond finances to ensure your wishes are respected.
- Healthcare Directives:
- Specify medical preferences with a living will.
- Appoint a healthcare proxy.
- Durable Powers of Attorney:
- Grant authority to manage financial matters if incapacitated.
- Ethical Wills:
- Share values, life lessons, and family history alongside financial plans.
Staying Ahead of Legislative Changes
Tax laws evolve, so regular updates to your estate plan are essential.
- Federal Changes:
- In 2026, estate tax exemptions may revert to pre-2018 levels (~$5.49 million).
- State-Level Updates:
- Monitor changes in estate and inheritance taxes in your state.
David J. Dobrusin, founder of Dobrusin Financial, is a CPA and Certified Financial Planner® delivering seamless tax and financial solutions. Named a 2024 Advisor to Watch by AdvisorHub, he also led Dobrusin Financial to the 2023 Inc. 5000 list. David is active with the Yellow Jacket Fiesta Bowl committee and Arizona’s EO.