For more on how to have a strategic estate planning discussion with clients, Scott Luhnau, estate planning consultant on our practice management team, shares answers to a few common questions.
Q: Which estate tax topics should I cover with my clients?
A: With the federal lifetime estate tax exemption scheduled to sunset in 2025, now is an opportune time to ensure your client is taking advantage of the current $12,920,000 exemption amount.1
Other considerations:
- Determine whether their assets are subject to state estate tax, which varies by state.
- Ask your client whether they expect to have a future liquidity event like an inheritance or business sale that needs to be factored into his or her estate plan.
Q: Which types of trusts should I recommend to my clients?
A: Trusts give clients more control over how and to whom assets are transferred. The types of trust will vary by client need, but a few common ones are:
- Irrevocable life insurance trust
- Generation-skipping trust (GST)
- Intentionally defective grantor trust
Q: How can I make sure my client’s assets are titled properly so they flow through their estate plans?
A: Assets such as life insurance, annuities or individual retirement accounts (e.g., IRAs, 401(k) plans, Roth IRAs) pass directly to heirs through a beneficiary designation. The following are common ways to title assets to help transfer them more smoothly upon a client’s death:
- Joint Tenants with Rights of Survivorship (JTWRS)
- Pay on Death (POD)
- Transfer on Death (TOD)
Q: What factors should clients consider when deciding whether to pass their assets outright to their children or within a trust?
A: Along with the age of children, other factors to consider are:
- Level of a child’s financial maturity and ability to be responsible with an inheritance
- Whether they want to provide a financial legacy for grandchildren
- Whether they want to provide protection from creditors/predators
Source:
1“What’s New – Estate and Gift Tax”
This article is intended for investment professionals and is provided for informational and educational purposes only. No representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. Reliance upon information in this material is at the reader’s sole discretion.
The use of trusts involves complex laws, tax rules, and regulations. Interested parties are strongly encouraged to seek advice from qualified tax, legal, and financial professionals before making any financial-related decisions.
