Estate planning and tax planning for high-end clients

On Behalf of | Mar 20, 2020 | Estate Planning, Tax Considerations |

Complex estate planning issues can arise when it comes to tax law and estate planning. Sometimes it takes a more-experienced law firm to assist the high-asset clients that are facing such issues. One such topic that may come up as April looms near are tax exemptions as they relate to estate planning.

In 2020, the lifetime estate tax exemption was set at $11.58 million per individual. This is a $180,000 uptick from 2019. Ultimately, this means that those with large estates can shield a greater amount of their assets from being taxed.

However, this increase may not last forever. Unless Congress acts to prevent a sunset, in 2025 the estate tax may return to $5 million per individual, as it was prior to 2018. Thus, it is important to strategize now when estate planning, to take advantage of the increased estate tax exemption while it is still around.

Gift-giving as an estate planning strategy

One strategy that may be worth considering is to gift up to $11.58 million to loved ones or a favorite charity during one’s lifetime. This reduces the size of one’s estate, which may then qualify a person to take advantage of the estate tax exemption. Transferring assets that appreciate can be another strategy that leads to potential tax savings, as the gift will be valued at the time of transfer, not the time of death.

It is also important to note that the Internal Revenue Service has stated that these gifts won’t be “clawed back” if the estate tax exemption returns to its pre-2018 amount, although retroactivity will not be allowed. Another factor to be mindful of is the Illinois unified credit cap of $4,000,000.

Retaining control of your business during your lifetime

If you own a business, another strategy is to organize it in a manner that allows you to retain both voting and non-voting shares. The non-voting shares can be placed in a trust for loved ones. This way, they can receive an inheritance, but since you still retain voting shares, you still retain some control over the enterprise. A succession plan is an essential part of estate planning for any business owner.

Keep in mind that this information does not constitute legal advice. Instead, attorneys experienced in handling complex high-asset estates should be consulted when it comes to estate planning and taxes. Whether you are a business owner seeking legal assistance with your estate or an attorney seeking the assistance of forensic accounting professionals, there are professionals who have the experience to handle these types of high-end cases. Our firm’s website may be a useful resource in this regard.