Family Wealth and Estate Planning Articles

A Charitable Remainder Trust (CRT) allows individuals to achieve two estate planning goals: providing income to beneficiaries and leaving assets to charity, all while receiving potential tax benefits. With options like CRATs and CRUTs, a CRT offers flexibility in payouts and contributions. However, it’s an irrevocable decision, so careful planning is essential.

The role of an executor involves significant responsibilities, including filing the will and initiating the probate process, identifying and managing the deceased’s assets, and ensuring all debts and final expenses are paid. Executors must also file the decedent's final tax returns and distribute remaining assets to beneficiaries according to the will. Acting as a fiduciary, the executor must maintain detailed records and act in the best interests of the estate, making it essential to seek professional guidance, such as from a CPA, to navigate this complex process effectively.

A spendthrift trust is a useful tool for protecting assets and ensuring responsible management of an inheritance. It prevents beneficiaries from directly accessing or mismanaging funds, while also protecting against creditors. The trustee plays a crucial role in managing payments, providing financial security for the beneficiary in line with the trust’s terms.

A Qualified Personal Residence Trust (QPRT) allows homeowners to transfer their residence into a trust, reducing their taxable estate while continuing to live in the home for a specified term. After the term, the property passes to designated beneficiaries, though the homeowner may need to pay rent if they remain in the home. This estate planning tool can help minimize taxes and facilitate the transfer of assets to heirs.

Life insurance is a crucial component of estate planning, offering an immediate source of wealth and liquidity to address your family's financial needs after your passing.

A landmark decision by the Supreme Court in Connelly v. United States has significant implications for how shares in closely held corporations are valued for estate tax purposes. The Supreme Court upheld that redemption obligations do not reduce the value of a corporation’s shares, creating a precedent that will likely affect future litigation and estate planning for family-owned businesses.

The IRS has issued final regulations for inherited IRAs, clarifying that most non-spouse beneficiaries must withdraw the entire balance within 10 years. These rules, effective in 2025, require annual distributions if the original account owner had started taking RMDs, while offering more flexibility for accounts where RMDs had not begun. Recent waivers also prevent penalties for missed distributions in certain cases.

A power of appointment in your estate plan provides flexibility by allowing a designated beneficiary to adjust trust distributions and modify beneficiaries based on current circumstances. There are two types of powers: general, which includes property in the holder’s taxable estate, and limited, which does not but may result in higher capital gains taxes for heirs. 

When choosing between traditional and Roth 401(k) contributions, consider both current and future tax implications as well as estate planning goals. Traditional 401(k)s offer immediate tax deductions but are subject to required minimum distributions (RMDs), potentially reducing the amount passed to heirs. Roth 401(k)s, while funded with after-tax dollars, allow for tax-free withdrawals and are exempt from RMDs starting in 2024, making them a valuable tool for estate planning.

A dynasty trust allows individuals to preserve and protect substantial wealth for multiple generations, potentially avoiding federal gift, estate, and generation-skipping transfer (GST) taxes. It can be established during one's lifetime or through a will and offers significant tax benefits and flexibility in designating beneficiaries. While irrevocable, it provides a lasting legacy with various protections and conditions for descendants.