What are the top five gift– and legacy–planning ideas that you should be considering?
“Although talking with your children about your legacy, your estate and their future inheritance can be uncomfortable, it’s a conversation that’s essential for them to understand your actions and to prepare them for the financial responsibilities of wealth.”
Given the recent substantial increase in the estate and gift tax exemption (from $5.49 million in 2017 to $11.4 million this year) combined with future uncertainty (without legislative action, the exemption
The following are just a handful of the many solutions—some exceedingly simple,
1. GIFT TO 529 PLAN ACCOUNTS.
We’ve all seen reports about the skyrocketing amount of student debt and its potentially adverse impact on the financial health of future generations. Under special rules unique to
2. SET UP A DONOR-ADVISED FUND.
If charitable giving is important to you, there’s no limit to the amount you can contribute to a donor-advised fund. DAFs allow you to
3. GIVE UNNEEDED REQUIRED MINIMUM DISTRIBUTIONS DIRECTLY TO CHARITY.
If you’re 70½ or older, you can use a qualified charitable deduction to transfer up to $100,000 annually directly from your traditional IRA to a public charity.3 Not only can
4. PURCHASE LIFE INSURANCE WITHIN AN IRREVOCABLE TRUST.
One of the most tax-efficient ways to transfer your wealth is by purchasing a survivorship policy within an irrevocable life insurance trust. Not only are policy costs considerably lower when based on two lives rather than a single life, but also the death benefit paid out to your heirs will be both income- and estate-tax free. Trust-held life insurance offers a tremendous opportunity to leverage the value of your legacy,
5. ESTABLISH A DYNASTY TRUST FOR MULTIPLE FUTURE GENERATIONS.
Funded with a gift up to the amount of your generation-skipping tax exemption, a dynasty trust can provide for future generations as long as state law permits the trust to remain in existence.
Although talking with children about your legacy, your estate, and their future inheritance can be uncomfortable, it’s a conversation that’s essential for them to understand your actions and to prepare them for the financial responsibilities of wealth. Perhaps you don’t plan on equalizing inheritances because one child has special needs, or a large asset (like a family business) has already
To reduce the potential for conflict, make sure you leave behind a letter explaining your intentions and motivations and talk to your attorney about adding a “no contest” provision to your will that would disinherit any child who challenges the division of property. Perhaps most important, consider inviting your children to
- IRS Rev. Proc. 2018-57
- IRS Instructions for Form 709
- IRS Publication 590-B
Securities offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Investment advisory services offered through SEIA, LLC. Royal Alliance Associates, Inc.