Year-End Tips for Estate Planning – The holiday season often puts family time front and center – a good reminder to update your estate documents to reflect your wishes, outline financial gifts to family members, and get ahead on your tax planning for next year. Here are four items for your checklist:

Inventory your assets and personal estate planning goals.

Meet with your financial advisor and update your net worth statement. The value of your assets and how you title them will help determine whether your estate will pay estate tax, and how your assets will ultimately pass to your loved ones. Watch out for inconsistent beneficiary designations on retirement accounts like 401(k)s and IRAs. Assets with beneficiary designations pass independently of your written estate planning documents, so you should understand how your beneficiary designations coordinate with your overall wealth transfer plan. Consider discussing your wealth transfer goals with your advisor to determine if your core legal documents work as you intend.

Review your estate planning documents.

After you inventory your assets and re-define your wealth transfer goals, it’s time to review the terms of your written estate planning documents with your financial advisor and/or your attorney to determine if changes are necessary. It’s good to review the key people named in your documents, such as power of attorney agents, executors, and trustees, to confirm you have the correct fiduciary line-up in place. Also, your net worth and family situation may have outgrown your estate planning documents, necessitating a new approach to protecting and preserving your wealth.

Consider making gifts.

In 2024, the federal annual gift exclusion amount is $18,000 per donor, per donee. Married couples may gift $36,000 to any single gift recipient. Gift amounts above the annual exclusion amount generally require filing a federal gift tax return; however, you can make unlimited gifts directly to an educational institution for tuition or to a medical care provider for certain medical expenses on behalf of your gift recipient. Gifts must be made by year-end to be considered for 2024.

Plan for 2026.

At the end of 2025, the Tax Cuts and Jobs Act is set to sunset without Congressional action. From an estate planning standpoint, the largest impact could be a reduction in the federal estate tax exemption amount. In 2024, the federal estate tax exemption is $13.61 million per person (or $27.22 million for married couples). This is the amount you can generally pass to your family members and loved ones estate tax-free. In 2026, the inflation-adjusted federal estate tax exemption may be reduced to between $7 and $7.5 million per person depending on inflation adjustments. If you have a taxable estate, or may have one post-sunset, now is a good time to start planning. High net worth families and individuals may be able to make large, advanced gifts before the end of 2025 to capture the historically high federal estate tax exemption before the reduction occurs. Some techniques to potentially consider include Spousal Lifetime Access Trusts and Gift Trusts for Children or Grandchildren. It is also important to evaluate discounted gifting techniques such as Qualified Personal Residence Trusts and Charitable Lead Trusts, as well as “estate freeze” techniques like Grantor Retained Annuity Trusts.

Don’t delay exploring options with your attorney and financial advisor while you still have time to plan!

Source: IRS.gov

Author Dominick J. Parillo Director of Wealth Transfer JD, CFP®

Dominick earned a JD degree from the George Mason University School of Law. He focuses on estate planning and wealth transfer strategies for high net worth families and business owners and advises clients on all facets of trust and estate administration.

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