Planning Gaps

Gifting & Estate Tax

Legacy planning conversations aren't always easy, but they are some of the most important discussions to have. While families may live miles apart throughout the year, the holidays often bring everyone together. Beyond celebrating traditions and making memories, it's also an ideal opportunity to discuss a family's long-term financial future. Identifying planning gaps now, long before the holidays, can help ensure everyone is prepared to review key decisions when gathered together, giving a family greater clarity and confidence for generations to come.

The OBBBA has provided greater certainty around the federal estate tax exemption, so estate plans built around prior TCJA assumptions should be reviewed to ensure they continue to accomplish the client's intended objectives.

For example, irrevocable trusts funded primarily to utilize the pre-OBBBA exemption may have unintended results. SLATs may have been funded aggressively to capture the anticipated higher exemption, leaving some clients concerned that they transferred more wealth than necessary. Bypass trust formulas with provisions directing assets to be funded “up to the exemption amount” may also warrant review as exemption levels change. Documents containing sunset-specific language or provisions should likewise be evaluated and updated where appropriate. Life insurance death benefits should be audited to determine whether coverage continues to reflect current estate liquidity needs, wealth transfer objectives, and the potential tax exposure of the estate.

Trust funding is another frequently overlooked planning gap. A trust that was properly executed but never funded may not accomplish its intended purpose. Real estate should be appropriately titled, and bank and brokerage accounts should be reviewed for proper ownership. Assets acquired after the trust was established should also be reviewed to ensure they have been incorporated into the plan as intended. Life insurance designations should be audited to confirm that the appropriate trust structure is in place.

Finally, state-level estate/inheritance taxes remain an important consideration. Even when a client resides in a state without an estate/inheritance tax, ownership of real estate, business interests, trusts, or other assets in another state may create additional exposure. A comprehensive review should consider both federal and state-level liabilities. Life insurance can provide an important source of liquidity to help meet estate tax obligations and preserve assets for the next generation. When thoughtfully integrated into an overall estate plan, the death benefit can help reduce the need for heirs to liquidate other assets at an inopportune time.

We welcome any questions or opportunities to assist you or your clients in achieving identified goals. We take pride in serving a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.