Ultra-high-net-worth individuals with estates valued above the $13.61 million estate-tax lifetime-exclusion amount in 2024 (or $27.22 million for married couples filing joint tax returns) have several opportunities to reduce their estate tax liabilities at death while preserving wealth for future generations while they are alive.
Give Multiple Gifts During Life. Making annual exclusion gifts enables you to transfer significant sums of money and appreciated assets out of your taxable estate, minimizing exposure to estate tax in the future. For 2024, individuals may transfer up to $18,000 in cash or appreciated assets tax-free to as many individuals as they choose. The amount increases to $36,000 for married couples filing joint tax returns.
While married couples who are both U.S. citizens can make unlimited gifts to each other tax-free, only the first $185,000 a spouse makes to a non-U.S. citizen spouse may be excluded from the total amount of taxable gifts for 2024. Similarly, you may gift an unlimited amount of money tax-free directly to a college or health care provider to pay for another person’s tuition or medical expenses. However, in each of these circumstances, gifts of non-cash assets, such as stocks or bonds, may inadvertently trigger a capital gains tax on the transfer.
Set up Irrevocable Trusts. Rather than making gifts outright to beneficiaries, you may apply the $18,000 gift tax exclusion to transfer assets into an irrevocable trust for which you name a trustee to manage the allocation of investments and distributions to beneficiaries. The trust assets enjoy protection from creditors and, unlike a UTMA or UGMA account for the benefit of minor children, outlive the grantor and stay in place for the named beneficiaries’ lives.
Another option for creating significant leverage in death benefits is an irrevocable life insurance trust (ILIT) that holds a life insurance policy outside a grantor’s taxable estate. The trust pays the policy premiums and is therefore considered the policy owner rather than the grantor. Death benefits that would otherwise be included in an individual’s taxable estate at death are instead distrusted by the trustee to the named beneficiaries. These policies may cover one individual or them and their spouse. When the spouse passes away, the insurance proceeds are paid to the trust for the benefit of named beneficiaries free of income and estate taxes, who may, in turn, use those proceeds to pay any estate taxes due.
Give to Charity. Making gifts of cash or appreciated assets to qualified charities, endowments or public or private foundations can yield immediate income tax deductions. Similar philanthropic and estate- and income-tax benefits apply when individuals transfer highly valued assets into a charitable remainder trust or a charitable lead trust. During the donor’s lifetime, the charity may allocate the gift for needed programs and services and invest the assets to allow them to grow. Upon the donor’s death, the charity will receive the trust principal.
Set Up A College Savings Plan for Children and Grandchildren. Giving the gift of education allows individuals to fund 529 savings plans through up to five years of contributions to beneficiaries without triggering gift taxes.
For 2024, you may gift up to $18,000 to 529 plans for as many recipients as you choose, including grandchildren, nieces and nephews. Your spouse may do the same, doubling your gifts yearly without exceeding the annual gift exclusion.
You also have the option to superfund 529 savings accounts with up to five years of gift tax exclusions. For 2024, that means you may transfer up to $90,000 (or $180,000 for married couples filing jointly) into a 529 plan free of taxes and allow those contributions to grow tax-free and be withdrawn by beneficiaries tax-free to pay for qualifying education expenses, including K through 12 private school tuition; college and trade school tuition; and higher education room and board, books and supplies. In recent years, allowable expenses for 529 beneficiaries have expanded under the SECURE Act to include up to $10,000 for repayments of student loans and the potential to roll over 529 account balances to beneficiaries’ Roth IRAs.
The professionals with Provenance Wealth Advisors have deep experience working with high-net-worth individuals to implement tax-efficient financial planning strategies designed to meet desired wealth-preservation goals.
About the Author: Eric Zeitlin is managing director of Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
 Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
 Eric Zeitlin is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
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Posted on April 3, 2024