10 Gift and Estate Tax Planning Opportunities for High-Net-Worth Taxpayers

There are many opportunities for high-net-worth taxpayers to minimize tax liabilities and achieve their financial goals.

1. The estate and gift tax exemption is $13.61 million for 2024 and will be increased for inflation as of Jan. 1, 2025. Taxpayers should consider using the increased exemption amount, especially since this amount is scheduled to be reduced to approximately $7 million beginning after Dec. 31, 2025.
2. High-net-worth married taxpayers should consider maxing out their exemptions before the end of 2025. If the exemption is to sunset, there is no clawback of the amount gifted over the reduced exemption amount.
3. Married couples who do not want to max out on both exemptions should consider using one spouse’s exemption with a dollar figure over $7 million. Unmarried taxpayers will have different strategies to consider and should seek tax advice based on their specific circumstances.
4. In 2024, the annual gift exclusion is $18,000. This amount can be tax-free per person per year, and married couples can gift up to $36,000 to an individual annually. Taxpayers who have not used their annual gift tax exclusion in 2024 should consider using it before year end.
5. Instead of waiting until year end to use annual exclusions, consider making 2025 gifts in January. That way, any appreciation on those funds earned during the year will not be part of your estate.
6. Any taxpayer considering gifting significant amounts should consider using trusts instead of making gifts outright. Trusts can provide substantial benefits, including asset protection, estate tax benefits and protection for children in case of divorce.
7. Consider making gifts of non-cash assets during periods of depressed valuations. If you own assets subject to market swings, gifting during market downturns may be a strategy to consider.
8. Taxpayers who want to make lifetime gifts to use the balance of their exemption but may be uncomfortable not having access to the gifted funds should consider making gifts to a spousal lifetime access trust (SLAT). The taxpayer who creates a SLAT will include their spouse as a beneficiary. The donor (grantor) grants the spouse direct access to the SLAT assets by including the spouse as a beneficiary. SLATS are generally grantor trusts for income tax purposes, and the grantor will continue to pay income taxes on the trust income, thereby allowing the trust assets to grow tax-free.
9. Taxpayers should consider estate planning strategies that are advantageous when interest rates are high. Such strategies include charitable remainder trusts and qualified personal residence trusts.
10. When determining what assets to gift, consider assets subject to discounts for lack of marketability and control. Business owners should also consider strategies for stacking income tax exclusions (relating to qualified small business stock), which can help amplify tax planning.

Questions? Connect with our tax experts for more information.