Estate Planning Ron Altenburg, CPA | Shareholder of Schenck - - PowerPoint PPT Presentation

Estate Planning

Ron Altenburg, CPA | Shareholder of Schenck

Transfer tax exemption amount

▶ Significant increase in the gift, estate, and generation- skipping transfer tax exemption amount

– From $5.6 million to $11.18 million, plus inflation indexing – Reverts to $5 million plus inflation indexing in 2026 or upon any prior law change – The unused exemption of the predeceased spouse ports over to the surviving spouse if a complete estate tax return for the predeceased spouse is timely filed – The ported over exemption of the surviving spouse’s most recently predeceased spouse is available for gifting or the surviving spouse’s estate – 40% federal estate tax applies to amounts above the exemption that don’t pass to charity or for a surviving spouse

Strategies for estate planning

▶ Make sure that your estate plan still does what you want given the doubling of the estate tax exemption

– We can review your estate planning documents and advise you of what would go to whom – Avoid inadvertently disinheriting your spouse

Strategies for estate planning

▶ People with no estate tax exposure even if the exemption amount goes back down (generally wealth under $5 million single or $10 million for married couples)

– Focus is on having enough assets to maintain desired standard of living – Consider portability election

Strategies for estate planning

▶ Planning for step-up in basis

– Leaving assets to or in trust for a surviving spouse so assets get another step-up in basis at the surviving spouse’s death – Making changes to existing trusts to get a step-up in basis at the beneficiary’s death

Strategies for estate planning

▶ Being selective on which assets pass to charity and which pass to family upon your death

– Consider naming charity as beneficiary of some or all of your qualified retirement plans, traditional IRAs, and annuities because these assets don’t get a step-up in basis and your family will pay income tax on withdrawals – Consider leaving assets that get a step-up in basis to family members because they can sell them without much, if any, capital gain because of the step-up

Strategies for estate planning

▶ People with estate tax exposure if the exemption amount goes back down (generally wealth between $5 million and $11.18 million single or $10 million to $22.36 million for married couples)

– Focus on maintaining standard of living – Planning for step-up in basis – Consider if there will be substantial appreciation in assets – Planning to use one spouse’s gift exemption if it’s looking like the exemption amount will go back down

Strategies for estate planning

▶ Consider lifetime gifts

– $15,000 per donee annual exclusion – Direct payment of medical expenses and tuition does not use any lifetime gift exemption – Gifts to equalize family members

▶ Have a flexible plan at first spouse’s death

– Portability and another step-up in basis at survivor’s death – Disclaimer funded family trust if concerned about exposure to estate tax at survivor’s death

Strategies for estate planning

▶ People with estate tax exposure (generally wealth over $11.18 million single or $22.36 million for married couples)

– Lifetime gift plan for optimal use of the exemptions

• Strategies must fit with your goals and objectives
• Shelter future appreciation from estate tax
• Concern about estate tax rather than step-up in basis

Strategies for estate planning

▶ There are many strategies ranging from basic to complex

– The more powerful strategies stretch the use of the gift exemption

• Gifts of discounted closely-held interests
• Gifts to trusts that use less gift exemption
• Gifts that benefit many future generations but avoid estate tax at

each generation

Strategies for estate planning

▶ Gift and sale to an Intentionally Defective Grantor Trust

– A more complex, but powerful, strategy to leverage use of the gift tax exemption – Fund a trust with a gift – Then sell assets to trust for a note – Trust is same as donor for income tax purposes

• No tax upon sale of assets
• Donor pays income tax on trust’s income but that’s not

considered a gift

• Cash flow is a critical issue

– Trust is outside the donor’s taxable estate

ANY QUESTIONS?

Ron Altenburg, CPA Shareholder 920-996-1164 ron.altenburg@schencksc.com

Thank you!