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?

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