Stacking Estate Planning Concepts – Saving Heirs a Lot More!

By now all high-net-worth clients should be aware that their biggest death-tax savings opportunity – the lifetime exemption – is going to be cut in half on January 1, 2026.  But taking advantage of the high exemption by gifting property now is only the beginning of how much death taxes can be reduced.

A good rule of thumb:  your clients who will benefit are single taxpayers worth over $10,000,000 and married taxpayers worth more than $20,000,000.

Consider these very brief descriptions of accepted planning concepts that address the common questions HNW clients will ask, and that can be layered on top of the current use of the high exemptions.  They can result in a much smaller tax bill as well as allowing for ongoing property management and use even after gifting takes place.

How much can I save using the full exemption now?

A single taxpayer who uses the full higher exemption by gifting from an estate growing at 5%, might reduce the tax due in 20 years by over $6,000,000.  A married couple using both could save over $12,000,000.

What if my spouse and I don’t want to give away both exemption amounts?

Then use at least one full Again, assuming 5% growth, this could save over $6,000,000 in 20 years.

What if Congress decides not to reduce the exemption amount?

Transfer of assets can be treated as a Family Loan (usually to an irrevocable trust). If the exemptions are not reduced the loan can be called, and the property returned.  If exemptions are lowered then the loan can be forgiven just prior to 1/1/2026 and the property kept in the trust, treated as a gift.

What if I don’t want to lose control of the gifted assets?

Assets to be transferred can be organized under a Family Limited Liability Company (FLLC) with a small-percentage voting interest and a large non-voting interest. The non-voting interest, representing the bulk of the FLLC value, can be transferred while the taxpayer retains all voting interest.

Can a gifting spouse continue to benefit from the assets transferred?

Yes, property can be transferred to a Spousal Lifetime Access Trust (SLAT), an irrevocable trust in which the other spouse is a beneficiary for life. The beneficiary spouse can receive the income from the trust each year, as well as distributions for his or her health, education, maintenance, and support.  This gives the gifting spouse vicarious access (through the beneficiary spouse) to the transferred assets, if needed.  When the beneficiary spouse dies, nothing in the trust is included in his or her estate.

Can spouses set up two SLATs so that each can use their full exemption for the benefit of the other?

Yes, but special attention must be given to the drafting of the trusts by the legal and tax advisors involved, because certain restrictions apply, so as not to run afoul with the IRS.

If you think implementation of any or all of these concepts might help one of your HNW clients, I am available to talk more fully with you, and your client, and their advisors.  Let me know at 706-614-3796 or tom@cpsadvancedmarkets.com.