Family Wealth and Estate Planning Articles

A defined-value gift can help maximize the current federal gift and estate tax exemption by transferring hard-to-value assets, like business interests, at a specified dollar amount. This strategy, if structured with precise language and a formula clause, can reduce tax risks by aligning the gift’s value with IRS standards. Consulting with an advisor ensures proper documentation and minimizes potential IRS challenges.

Probate is the legal process of settling an estate and transferring assets to heirs, but it can expose personal details to the public and attract unwanted attention. While the process typically takes six to nine months, it can be avoided through a revocable living trust, which keeps asset distribution private and outside of probate court. Understanding the probate process and available alternatives is crucial for effective estate planning.

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.