Klitzman Law Group, PLLC

Could Your Estate Plan Be a Disaster?

“We’re all looking to save taxes, court costs, legal fees and ‘make it simple’ for our heirs. A last will and testament is the cornerstone of all estate planning, maybe with a trust.”

You may think your estate plan is all set. However, it might not be. If you met with your attorney when your children were small, and your children are now grown and have children of their own, your estate could be a disaster waiting to happen, says a recent article “Today’s Business: Your estate plan—what could go wrong?” from the New Haven Register.

Most estate planning attorneys encourage their clients to revisit their estate plan every three to five years, with good reason. The size of your estate may have changed, you may have experienced a health issue, or you may have a new child or a grandchild. There may be tax law changes, statutes may have been updated and the plan you had three to five years ago may not accomplish what you want it to.

Many people say they “have nothing” and their estate is “simple.” They might also think “my spouse will get everything anyway.” This is wrong 99% of the time. There are unintended consequences of not having a will—accounts long forgotten, an untimely death of a joint owner, or a 40-year-old car with a higher value than anyone ever expected.

Your last will and testament designates who receives your assets and provides for any minors. A will can also help protect your wishes from a challenge by unwanted heirs after your passing.

The federal estate tax exemption today is $12.6 million, but if your will was created to minimize estate taxes when the exemption was $675,000, there may be unnecessary provisions in your plan. Heirs may be forced to set up inherited trusts or even sub-trusts. With today’s current exemption level, your plan may include trusts that no longer serve any purpose.

When was the last time you reviewed your will to see whether you still want the same people listed to serve as guardians for minor children, executors, or trustees? If those people are no longer in your family, or if the named person is now your ex, or if they’ve died, you have an ineffective estate plan.

Many adults believe they are too young to need an estate plan, or they’ve set up all of their assets to be owned jointly and, therefore, don’t need an estate plan. If one of the joint owners suffers a disability and is receiving government benefits, an inheritance could put all of their benefits at risk. Minor children might inherit your estate. However, the law does not permit minors to inherit assets, so someone needs to be named to serve as their conservator. If you don’t name someone, the court will, and it may not be the person you would choose.

What about using a template from an online website? Estate planning attorneys are called in to set things right from online wills with increasing frequency. The terms of a will are governed by state law and often these websites don’t explain how the document must be aligned with the statutes of the state where it is signed. Estate plans are not one-size-fits-all documents and a will deemed invalid by the court is the same as if there were no will at all.

If you don’t have an estate plan, if your estate plan is outdated, or if your estate plan was created using an online solution, your heirs may inherit a legal quagmire, in addition to your coin collection. Give yourself and them the peace of mind of knowing you’ve done the right thing and have your will updated or created with an experienced estate planning attorney.

Reference: New Haven Register (Oct. 29, 2022) “Today’s Business: Your estate plan—what could go wrong?”

Don’t Miss Out on Estate Planning Opportunities

“People often overlook critical steps when they are doing their estate planning.”

The recent article, “Rooting Out Estate Planning Opportunities,” from Financial Advisor offers a number of frequently missed opportunities in estate planning. Chief among them are failing to update estate plans, as changes to tax laws could mean that strategies used when your estate plan was initially created may no longer be relevant.

Before these opportunities can be discovered, it’s important to have a clear accounting of all of your assets, including a balance sheet of each “bucket” of resources: personal assets, trust assets, qualified plan assets, etc. The secret to success: meeting with your estate planning attorney every few years to review this entire picture to identify potential opportunities.

Once you have a sense of the whole picture, it’s easier to spot opportunities. For instance:

A Spousal Lifetime Access Trust, or SLAT, is an irrevocable trust used when a grantor wants to transfer part of their spousal exclusion into a SLAT to provide for their spouse and descendants. The SLAT keeps assets out of the donor’s estate and authorizes the trustee to make distributions to the grantor’s spouse, while at the same time it allows children or other heirs to be named as beneficiaries. Many couples use these trusts to protect assets from lawsuits.

There are some drawbacks to keep in mind. If one spouse is the beneficiary of the other spouse, all is well while both are living. However, if one spouse dies or becomes incapacitated and all assets are in the trust, the other may lose access to the trust created for the now deceased spouse.

The loss of access and the restrictions on SLAT distribution could be addressed by having both spouses purchase life insurance policies to fill the gap. At the same time, the couple would be well advised to look into disability and long-term care insurance.

Another situation is the use of a credit shelter trust, often called a bypass trust because it bypasses the surviving spouse’s estate. They are not as advantageous as they used to be because of today’s high estate tax exemption. They were also popular when the surviving spouse wasn’t able to use their deceased spouse’s estate tax exemption.

With the federal estate tax exemption up to more than $12 million, many who still have credit shelter trusts may find they don’t make sense in the short term. However, for now the federal estate exemption is set to drop down to $6 million when the Jobs and Tax Act sunsets. Depending upon your circumstances, it may be worthwhile to maintain this trust. Your estate planning attorney will be able to guide you.

Merging old trusts into new ones, or “decanting” them, makes sense in some situations. A new trust can be better crafted to align with the latest in tax laws and serve the same beneficiaries for as long as your state’s laws permit.

The two important takeaways here:

• Estate planning requires a complete look at all of your assets and liabilities to make the best decisions on how to structure any estate and tax strategies; and
• Estate plans need to be reviewed on a regular basis—every three to five years at a minimum—to ensure the strategies still work, despite any changes in tax laws and your situation.

Reference: Financial Advisor (Nov. 1, 2022) “Rooting Out Estate Planning Opportunities”

What Is the Point of a Trust?

“Thinking about what happens to your family when you pass away may be upsetting. However, it can be a good way to reduce the stress your loved ones will deal with during the grieving process.”

A trust is an agreement made when a person, referred to as the trustor or grantor, gives a third party, known as the trustee, the authority to hold assets for the trust beneficiaries. The trustee is in charge of the trust and responsible for executing the trust’s instructions as per the language in the trust, explains a recent article from The Skim, “What is a Trust? (Spoiler: They’re Not Just for the Wealthy).”

Some examples of how trusts are used: if the grantor doesn’t want beneficiaries to have access to funds until they reach a certain age, the trustee will not distribute anything until the age as directed by the trust. The funds could also be solely used for the beneficiaries’ health care needs or education or whatever expense the grantor has named, the trustee decides when the funds should be released.

Trusts are not one-size-fits-all. There are many to choose from. For instance, if you wanted the bulk of your assets to go to your grandchildren, you might use a Generation-Skipping Trust. If you think your home’s value may skyrocket after you die, you might want to consider a Qualified Personal Residence Trust (QPRT) to reduce taxes.

Trusts fall into a few categories:

Testamentary Trust vs. Living Trust

A testamentary trust is known as a “trust under will” and is created based on provisions in the will after the grantor dies. A testamentary trust fund can be used to make gifts to charities or provide lifetime income for loved ones.

In most cases, trusts don’t have to go through the probate process, that is, being validated by the court before beneficiaries can receive their inheritance. However, because the testamentary trust is tied to the will, it is subject to probate. Your heirs may have to wait until the probate process is completed to receive their inheritance. This varies by state, so ask an estate planning attorney in your state.

Living trusts are created while you are living and are also known as revocable trusts. As the grantor, you may make as many changes as you like to the trust terms while living. Once you die, the trust becomes an irrevocable trust and the terms cannot be changed. There’s no need for the trust to go through probate and beneficiaries receive inheritances as per the directions in the trust.

What are the key benefits of creating a trust? A trust doesn’t always need to go through probate and gives you greater control over the assets. If you create an irrevocable trust and fund it while living, your assets are removed from your probate estate, which means whatever assets are moved into the trust are not subject to estate taxes.

Are there any reasons not to create a trust? There are costs associated with creating a trust. The trust must also be funded, meaning ownership documents like titles for a car or deeds for a house have to be revised to place the asset under the control of the trust. The same is true for stocks, bank accounts and any other asset used to fund the trust.

For gaining more control over your assets, minimizing estate taxes and making life easier for those you love after you pass, trusts are a valuable tool. Speak with your estate planning attorney to find out which trust works best for your situation. Your estate plan and any trusts should complement each other.

Reference: The Skim (Oct. 26, 2022) “What is a Trust? (Spoiler: They’re Not Just for the Wealthy)”

How Do Special Needs Trusts Work?

“A special needs trust (SNT) can help you provide financial security to your child after you die without leaving them ineligible for the government benefits that they need to sustain care.”

Parents with children who have special needs know they play a pivotal role in their child’s medical, social, emotional and mental health. They also face the challenges of figuring out government assistance programs like Medicaid and how these and other programs provide much-needed help throughout a child’s life. Another important way that parents of children with special needs help is with the creation of a special needs trust, as explained in the article “Special Needs Trust (SNT): What It Is and How It Works” from Forbes.

A special needs trust is used to hold assets in an account to be used to support an individual with special needs. The funds belong to the trust and not the individual, so they are not factored into their eligibility for government benefits.

SNTs are typically set up by a parent, grandparent, or guardian. The person who sets up the account, called the “grantor,” funds the account, as may any other individuals who wish to provide for the child.

The grantor names a trustee, or a third party, who administers the trust. The trustee is a fiduciary and must act in the best interest of the beneficiary. Funds are to be distributed in accordance with the directions in the trust. The trustee will be responsible for distributing funds, following government benefit rules and requirements, and managing tax obligations, among other things.

Parents are often the trustees, although others, like siblings or close relatives, may also be trustees. Parents who are both grantor and trustee generally name a successor trustee to take over after they die, become incapacitated or resign from their role.

A person who may not be able to support themselves due to a medical condition or a disability can gain financial security from an SNT.

Someone with special needs is likely to rely on means-tested government benefits, like Supplemental Security Income (SSI) or Medicaid. These benefits are only available to people with limited income or assets. Anyone receiving SSI, for example, may not have more than $2,000 of countable resources.

A parent who wishes to provide support after they die must plan in advance, so their bequest does not result in the person losing their benefits. This could happen if money is left through anything except a special needs trust. An estate planning attorney will know how to structure the parent’s estate plan to protect the individual with special needs and their government benefits.

Assets in an SNT can be used for a wide variety of expenses, including out-of-pocket medical or dental expenses, personal care givers, rehab services, education, vacations, and other permissible uses.

There is a lot of complexity involved with creating a special needs trust. For one, there are several different kinds of SNTs. You’ll want to select the one best suited for your family. Laws about means-tested benefits vary across states, so you’ll need to work with an estate planning attorney familiar with the laws of your state.

A well-drafted estate plan, incorporating a special needs trust, will provide your loved one with the resources to maintain as much normalcy as possible as they adjust to life without their parents.

Reference: Forbes (Sep. 22, 2022) “Special Needs Trust (SNT): What It Is and How It Works”

What Do Your Kids Want to Inherit?

“While it might seem too soon to think about this uncomfortable topic, it’s still something that needs to be carefully planned to make everyone’s life a little easier as they handle the grief of losing a loved one.”

Nearly everyone needs a will, also known as a last will and testament, to list all properties and assets and how they should be distributed postmortem. While the decisions are all yours, it’s helpful to know what personal possessions your children may or may not want to receive as part of their inheritance, as explained in the article “12 Things Your Kids Actually Might Want to Inherit” from Entrepreneur.

Making a list of things you want your children to inherit will save a lot of time, especially if you have a lot of possessions you want to give to them. You might think they want your collection of fine china and glassware, silverware and Grandma Helen’s sculptures. However, you might be wrong.

Wanting your children to have these items so they stay in the family isn’t wrong. However, it’s more than likely they’ll be donated after you die. If you want to make your children’s lives a little easier, here are twelve things they actually might want:

Cash money. Cash is the ideal asset, since it can be easily divided. Cash also provides an easy way to give your children a chance to invest in stocks or real estate or a means of starting a business.

Annuities. An inherited annuity has several advantages, including tax benefits, especially if they are non-qualified annuities paid for with after-tax dollars. By annuitizing an annuity, heirs may convert it into a steady and dependable income stream to help cover living expenses. They can choose to do this for a pre-defined period of time or for life, if the original annuity contract was created as a multi-life annuity.

Recipes. There are any number of ways to create a cookbook, from a simple bound folder to a hard-cover book likely to be shared and talked about, bringing warm memories to all.

Family Photos. Whether you take the time to organize them or not, videos and photos are your family’s history. Keep them in a water-proof bin and protect them for the future generations, until you’re ready to hand them over.

Trusts. Trusts are not just for wealthy people. Trusts are an all-purpose tool for passing assets across generations, controlling how they are used and minimizing estate tax liability. A trust is a legal entity to hold a variety of assets. A trust allows you to set down what you want done with the money, from paying for college to buying a first home. You name a trustee who is in charge of managing the trust and making sure your wishes are followed.

Furniture. Today’s young adult is more likely to want authentic furniture with family history than the latest knockdown furniture from Ikea. They also know how expensive good furniture is and may welcome saving money when furnishing their first home.

Vinyl Records. While collectors may value pristine records, the albums you listened to with scratches and skips will be prized by younger listeners. They evoke happy memories and hold sentimental value.

Life Insurance. If you want to leave money for your family but worry about the impact of taxes, life insurance is a good option. Your estate planning attorney will be able to explain who the beneficiary should be, or if you need to set up a trust to benefit your children.

Real Estate. Real estate is a strong investment with a track record of growth. Keeping a vacation home in the family for future generations requires extra planning. For many families, even a simple cabin by the lake is a touchstone of family history.

A Business. Family-owned businesses are often passed to the next generation. An established business has value up front and, if all is well with the business, provides income. A succession plan will be needed. Be realistic: if your children have never set foot in your office or expressed interest in the business, selling it may be a better move.

Investment Accounts. Stocks, bonds or other investment accounts can be gifted to children while you are living or after you die. Like cash, this asset is easily divided and relatively easy to give.

Education Funds. You can start a College Savings Account 529 for individual children when they are born or open one at any time to help with college expenses. Having financial help for college could be the difference between the burden of college loans or being able to explore different careers without the constant worry that a six-figure debt brings.

Your estate planning attorney will be able to explore all of the different ways to transfer wealth to the next generation while you are living and after you pass.

Reference: Entrepreneur (Oct. 30, 2022) “12 Things Your Kids Actually Might Want to Inherit”

What Is the Purpose of a Guardian?

“Few will argue that the most important time to have a will is when you are parents of young children.”

When you’re nearing retirement or enjoying your golden years, you need a will to distribute your worldly possessions and wealth accumulated during your lifetime. However, you also need a will when you’re in the parenting phase of life, according to a recent article “Why parents need a will to establish legal guardianship” from Wausau Pilot & Review. The future of your children depends upon your having a will and other legal documents in place.

As parents, you have the opportunity to name the person who will be your children’s guardian, in the event both parents die. Your will can also include information regarding who they should live with, who will be in charge of any funds they will inherit, and who will raise them. It’s not a pleasant thought, but without a will to name a guardian, children are at risk.

Naming the guardian can avoid your children being placed in temporary foster care until a judge decides who should raise them. Being with a trusted family member or friend during a catastrophic time in their lives would be far better than being cared for by people they don’t know, no matter how well-meaning they may be.

If one of the parents survives the other, the custody and care of the children generally remains with the surviving parent. However, if the children are under age 18 and both parents die, they need a legal guardian.

In most cases, the court will honor a deceased parent’s request for the person named in the will, unless it is determined this person may not be the best person to serve as guardian.

Parents can and do die at the same time, making proper estate planning and identifying a guardian very important to have in place.

The guardianship becomes legal with a court appointment after a court hearing, although laws and procedures do vary from state to state.

Be careful when choosing a guardian. Make sure that the person is ready and able to serve. There is no obligation for someone to accept the appointment, so evaluate your choice carefully. Like your estate plan, this is not a one-and-done appointment. It should be reviewed every few years, as your children grow and their needs change.

Consider these questions when figuring out who would be the best guardian:

• Does the person share your belief system in education or religion?
• Can the person raise your child until they reach legal age? Parents are often the first person we think of, but is a 68-year old grandparent with health issues capable of serving in this role, especially if the child is a toddler?
• Does the person live nearby, or will your children need to change schools, lose friends and leave the family home?

Guardianship needs to be integrated into the rest of your estate plan. For instance, if you have a life insurance policy, is the designated beneficiary your child? A minor cannot inherit assets, but a trust can. Your estate plan may include a trust to own funds and a trustee to manage them. Will that person be the same as the guardian? There are as many good reasons to divide the roles as there are to keep them separate.

Your estate planning attorney can help you and your spouse work through the issues based on your unique situation. The peace of mind you’ll feel in knowing your children will be cared for if the worst happens is well worth the time and effort.

Reference: Wausau Pilot & Review (Oct. 23, 2022) “Why parents need a will to establish legal guardianship”

Is Spouse Automatically Your Beneficiary?

“If the surviving spouse is a second or subsequent spouse and did not have any children with the decedent, the surviving spouse takes even less.”

People make a grave error when they don’t have a will because they think their surviving spouse will automatically inherit all of their worldly goods. The laws of intestacy work differently, as explained in a recent article “Estate Planning: The spouse doesn’t always get everything” from nwi.com.

The surviving spouse rarely receives everything under the intestate laws. This often comes as a surprise to people. The usual response is “Oh, that can’t be right.” Oh, but it is!

In many states, one half of the decedent’s probate assets are distributed to the spouse and the other half are distributed to the decedent’s child or children.

If it’s a second or third marriage and the couple didn’t have children of their own, the surviving spouse ends up with even less.

Assets are divided between the spouse and biological children.

Bear in mind the intestate laws only apply to probate assets. Assets owned jointly will go to the other joint owner, as well as assets listing the surviving spouse as the beneficiary.

If you’d prefer to leave more to your spouse, you need a will. Intestacy literally translates to dying without a will. If you have a will and then die, you haven’t died intestate, and the provisions don’t apply.

However, there’s more to consider. Depending on your state’s laws, if you die and there are no living children, the spouse still doesn’t necessarily inherit everything. If your parents are living, they are also entitled to a portion of the estate.

This is another reason why it’s so important to have a complete estate plan, including a last will and testament, powers of attorney and health care power of attorney.

Trusts are used to control how assets are distributed, either during life or upon death. You can create a trust to be used by your spouse by creating the trust, funding it with assets and setting the terms of the distribution.

Each state has its own laws of intestacy, so an estate planning attorney who practices in your state needs to be contacted to determine what would happen to your spouse if you didn’t have a will. Your best recommendation is to meet with an experienced estate planning attorney and create a plan to protect your spouse and your children

Reference: nwi.com (Oct. 23, 2022) “Estate Planning: The spouse doesn’t always get everything”

How GRATs can Transfer Wealth Across Generations

“Grantor-retained annuity trusts, or ‘Grats,’ are a wealth-transfer technique that shift investment growth out of an estate to heirs tax-free.”

The first thing to know—GRATs are not just for the uber-wealthy, despite the title of the article “Here’s how uber-rich pass wealth to heirs tax-free when markets are down” from CNBC. “Regular” people and their families may benefit from using Grantor Retained Annuity Trusts. The second thing to know–GRATs work well when stocks are down in value and are expected to rebound relatively quickly. While no one knows what the markets will do today or six months from today, GRATs are good estate planning strategy for many people.

The GRAT works like this: assets like stocks in a privately-held business are placed into the trust for a specific amount of time—maybe two, five or ten years. Any investment growth passes to heirs and the original owner gets the principal back. This is, of course, a highly simplified description.

The family can avoid or reduce estate taxes at death by shifting future appreciation out of the estate. The investment growth is the tax-free gift to heirs. If there’s no growth, the asset passes back to the owners. Lowered assets likely to return in value over the life of the trust are the most likely to make this strategy work best.

The S&P 500, a commonly used barometer for U.S. stock markets, is down by about 24% as of this writing, making now an excellent time to consider a GRAT.

The GRAT makes the most sense for families who are subject to the federal estate tax. While the federal estate tax is applied to estates is now valued at more than $12.06 million, the federal estate tax is expected to drop precipitously when the Tax Cuts and Jobs Act of 2017 expires on December 31, 2025.

GRATs are said to have been used by some of the nation’s wealthiest people, including Michael Bloomberg, Mark Zuckerberg, the Walton family (of Walmart fame), Charles Koch and his late brother David Koch, Laurene Powell Jobs (the widow of Apple-founder Steve Jobs), Oprah Winfrey and others. However, a GRAT can work for people who are not among the top wealthiest in the country.

In 2026, the estate-tax threshold will be cut in half, unless Congress extends the Act. Individuals with $6 million estates, or $12 million for married couples, should start considering how to transfer their wealth now.

Rising interest rates put another wrinkle in planning for the future. The complex inner workings of GRATs concern interest rates, which must technically exceed a certain threshold—the “7520 interest rate,” also known as the “hurdle” rate—to pass tax free from the estate. This rate is currently up by 4% from October 2021.

Here’s an example of how this applies to a grantor-retained annuity trust. If investments in a two-year trust grew by 6% over two years, a trust pegged to the hurdle rate of October 2021 would allow 5% of the overall growth pass to heirs, but this would fall to 2% for a trust established in October 2022.

Your estate planning attorney will be able to explain whether a GRAT is a good fit for your wealth strategy, considering your tax liabilities, the size of your estate and your comfort level with any strategies tied to interest rates and markets.

Reference: CNBC (Oct. 10, 2022) “Here’s how uber-rich pass wealth to heirs tax-free when markets are down”

Why Is Power of Attorney So Important for Estate Planning?

“Estate planning takes a lot of time, but another factor that needs to not be overlooked is having a power of attorney.”

One of the most overlooked and important documents in estate planning is the Power of Attorney. A recent article from Farm Progress, “Often overlooked estate planning issues: Powers of attorney,” explains how this document works and why it’s so important.

Most people will become incapacitated at some point in our lives, especially as we age. Some experts believe this number is as high as two-thirds of all Americans who, at some point in their lives, will become incapacitated. We are living longer and the chances of developing a condition to impair or rob us of the ability to make important health or financial decisions increases every year.

Powers of Attorney are just as important for young adults because the risk of disability or impairment is often actually higher than death for someone younger.

Designating a Power of Attorney gives you the control of choosing a trusted person to step in and act as your agent. A “Durable” POA remains in effect until it is revoked, or upon the death of the person who made it.

The person establishing the POA is the “principal.” The principal has the right to revoke the POA until they lack capacity to do so. The person or persons named to act for you through your POA is your “attorney-in-fact” or “agent.”

You may choose to have the POA in a “durable” form or a “springing” POA. The springing POA becomes effective only when you have been determined to be incapacitated. This sounds like a good idea. However, it comes with an issue: for the springing POA to become active, there must be proof of incapacity.

Depending upon your state, this may require a court to review documents attesting to your incapacity from a physician or health care provider. The durable POA is always in effect and your agent can step in for you immediately.

Everyone should also have a Health Care Power of Attorney, sometimes called a Health Care Proxy or a medical POA. The Health Care POA should be someone who can act quickly, so it’s optimal to name someone who lives nearby, in case there’s an emergency and decisions need to be made in a timely manner.

While it’s tempting to simply download a form from the internet, these two POAs are best prepared with an estate planning attorney, so they align with your state’s laws and your wishes. You may want someone to make all decisions for you, or you may want to limit their powers. Your estate planning attorney will be able to create a document to suit your specific needs.

It’s also important for your estate plan to address digital assets, since today so much of our financial and medical information is stored online. Your agent also needs to be able to access your digital life, to keep your life running smoothly and make informed decisions.

Reference: Farm Progress (Oct. 18, 2022) “Often overlooked estate planning issues: Powers of attorney.”

IRS Announces New Lifetime and Gift Tax Exemptions

“The Internal Revenue Service Today announced new inflation-adjusted limits for 2023 that will allow well-off individuals to transfer much more to their heirs tax free during life—or at death.”

There’s big news from the IRS for people who use gifting as part of their estate planning. The annual exclusion increased from $16,000 in 2022 to $17,000 in gifts in 2023, without needing to use up lifetime gift and estate tax exclusion or paying a gift tax. The article “Lifetime Estate and Gift Tax Exemption Will Hit $12.92 Million in 2023” from Forbes provides details.

The “unified credit,” aka the lifetime estate and gift tax exemption, will also jump to $12.92 million in 2023, up from $12.06 million in 2022. Couples may combine their exemption, so a wealthy couple making gifts in 2023 can pass along $25.84 million.

Here is another way to look at what this change means. If you’ve already maxed out on non-taxable gifts, you can give an extra $1.72 million to heirs in 2023, in addition to making $34,000 per couple ($17,000 x two) in annual gifts to every child, grandchild, siblings, niece or nephew or anyone you’re feeling generous towards.

In addition to making these generous $17,000 gifts, you can also pay an unlimited amount towards someone else’s tuition or medical expenses without any impact to your lifetime exemption. An important detail: the payments must be made directly to the school or the medical provider.

The estate tax is still 40%, but the $12.92 million per-person lifetime exemption is just one of many strategies used to transfer wealth. Others include the use of GRATs and other trusts to leverage the exemption. The bear market provides numerous planning opportunities.

Keep in mind the $12.92 million exemption is not forever. Under the 2017 Tax Cuts and Jobs Act, the lifetime exemption will sunset in the start of 2026, and the decrease will be more than half its current value.

Whether the estate and gift tax exemption will actually drop so dramatically depends on the politics of Congress and the White House and the budget and deficit pressures of the year. An early version of the Build Back Better proposal would have cut the exemption in half but did not win enough votes to pass.

Another reason to make these lifetime gifts sooner rather than later? As of 2022, seventeen states and the District of Columbia still have state estate taxes and/or inheritance taxes. For wealthy families, these exemptions can make a big difference in estate tax liabilities.

Reference: Forbes (Oct. 18, 2022) “Lifetime Estate and Gift Tax Exemption Will Hit $12.92 Million in 2023”