As 2024 comes to a close, it's time to pause and assess your estate plan. For high-net-worth individuals, this period isn't just about wrapping up the year—it’s about ensuring your legacy is secure, your tax strategies are optimized, and your wealth is structured to transition seamlessly to the next generation. Let’s dive into the key areas you should focus on as we approach year-end.
Leverage the Current Estate Tax Exemption
The federal estate tax exemption for 2024 is at a historically high $13.61 million per individual, but it's set to shrink significantly by the end of 2025, likely dropping to around $7 million. For estates that exceed this threshold, now is the time to act. By making strategic gifts or placing assets into irrevocable trusts, you can lock in today’s generous exemption and reduce future tax liabilities. With the clock ticking on this opportunity, forward-thinking families should consider their options now to mitigate future estate tax burdens.
Maximize the Annual Gift Tax Exclusion
In 2024, the annual gift tax exclusion rose to $18,000 per recipient, offering a powerful way to reduce your taxable estate. If you're looking to transfer wealth to family members or other beneficiaries, this is an opportunity you don’t want to miss. A married couple, for example, can jointly gift $36,000 to each recipient annually without triggering gift taxes. Over time, this strategy can help significantly lower your taxable estate while enriching your loved ones now.
Make Strategic Charitable Contributions
Year-end is also a prime moment to review your charitable giving strategies. Beyond the feel-good factor of supporting your favorite causes, charitable contributions can unlock valuable tax deductions. If you're looking for flexibility in how you distribute your philanthropic efforts, consider contributing to a donor-advised fund (DAF). This vehicle allows you to make a charitable donation now, securing an immediate tax deduction, while giving you time to decide how the funds will be used. Alternatively, charitable remainder trusts (CRTs) offer the dual benefit of providing an income stream during your lifetime while benefiting your chosen charities after your passing.
Review and Update Trusts
Trusts are the backbone of sophisticated estate planning, offering flexibility, tax benefits, and protection for your assets. But they are not set-it-and-forget-it tools. The end of the year is the perfect time to ensure your trusts are fully funded, aligned with your financial goals, and up to date with any new acquisitions. Have you acquired new assets this year? If so, are they titled correctly in the name of the trust? Regularly reviewing the terms of your trust ensures that they still reflect your wishes and adjust for any family or financial changes.
Evaluate State-Specific Considerations
Living in a state like New York, which has its own estate and inheritance taxes, adds another layer of complexity to your planning. While the federal exemption is high, many states set their own thresholds much lower. In New York, for example, estates over $6.94 million are subject to state estate taxes. A well-crafted estate plan takes these state-specific taxes into account, ensuring that your loved ones aren’t left with an unexpected tax bill.
Review Beneficiary Designations and Asset Titling
Beneficiary designations on your life insurance policies, retirement accounts, and other financial assets should align with your overall estate plan. Even small oversights can lead to unintended consequences, such as assets bypassing your trust or going to the wrong person. As the year wraps up, take the time to review and update these designations. Similarly, double-check that all your assets are titled properly, especially if you live in a community property state or have a blended family, where complications can arise.
Final Thoughts
Year-end estate planning is about more than just checking boxes; it's a chance to refine your strategy, reduce your tax exposure, and ensure your financial legacy is secure for generations to come. From maximizing the gift tax exclusion to taking advantage of today’s estate tax exemption, now is the time to act. The strategies you implement today can have long-lasting effects on your estate and the financial well-being of your loved ones.
To ensure your estate plan is fully optimized for 2024 and beyond, call our office at (212) 971-9770 or email us at info@laramsass.com. We specialize in crafting tailored plans that meet the complex needs of high-net-worth individuals and families, ensuring that your legacy is protected for generations to come.
Follow us on Instagram at https://www.instagram.com/laramsass/ and on LinkedIn at linkedin.com/in/sasslara for more tips throughout the remainder of 2024 to best optimize your year-end estate planning.
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