Exploring Wealth Transfer

Planning for Reduced Exemption Levels

  • Wealth Planning

Exploring Wealth Transfer: Planning for Reduced Exemption Levels

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) increased the gift, estate, and generation-skipping transfer (“GST”) tax exemption amounts significantly. In 2023, the exemption amount is $12.92 million per individual ($25.84 million for a married couple) and is projected to grow with inflation over the next two years. Many provisions of the 2017 Tax Act, including the increased exemption amounts, are scheduled to sunset at the end of 2025. In 2026, the exemption amounts will revert to 2017 levels ($5 million indexed for inflation, instead of $10 million indexed for inflation).

In theory individuals with taxable estates should consider taking advantage of the increased exemption amounts by making gifts ahead of 2026. In practice, evaluating whether and how much an individual should transfer is a complex decision with various factors. Below is a non-comprehensive list of some of the key questions to consider before year-end.

Elemental Questions

  • What is the total value of the assets, including life insurance, in your and your spouse’s estate? Are you concerned about this being enough?
  • What amount of assets do you believe is needed for you and your spouse to maintain your lifestyles?
  • Have you or your spouse made taxable gifts in the past and used some of your gift tax credit? If so, how much? Was the gift made directly to the recipient or an entity (trust, LLC, etc.)?
  • Do you currently have any viable trust/entities established to receive a transfer of assets?

Planning Considerations

  • If you thought your ability to manage estate tax consequences could be impeded in the future, would you act now?
  • If you were to place assets outside your estate to reduce the potential of future estate taxes, who would you want/need to benefit from those assets; spouse, children, charity, and/or yourself?
  • How do you feel about doing something that may be irrevocable/unchangeable?
  • Do you think you could afford to give away some future appreciation of your assets but not the assets themselves?

Asset Selection

  • What assets are you willing to gift? Which do you use for lifestyle income, and which are best suited for growth?
  • Are you willing to pay income taxes on the assets gifted by you to a trust?
  • If you transferred assets, do you plan on them being sold in the future? Or are they illiquid and more likely to be held for an extended period of time?

By leveraging effective wealth transfer techniques, you can preserve and extend your financial legacy for the benefit of future generations. To maximize the increased exemption amounts ahead of 2026, speak with your Private Advisor to help guide you through this process and ensure you’re making the most of your assets.

This material was prepared by Rockefeller Capital Management solely for informational purposes only. The views expressed are those of Rockefeller Global Family Office’s senior investment professionals as of a particular point in time and are subject to change without notice. Actual events or results may differ materially from those reflected or contemplated herein. The information and opinions herein should not be construed as a recommendation to buy or sell any securities, to adopt any particular investment strategy, or to constitute accounting, tax, or legal advice. The information provided herein may not be relied on for purposes of avoiding any federal tax penalties. All clients should be aware that tax treatment is subject to change by law, or retroactively, and clients should consult their tax advisors regarding any potential strategy, investment or transaction. Any planned financial transactions or arrangement that may have tax, accounting or legal implications should be reviewed with your personal professional advisors. Forward-looking statements, including those presented here, are inherently uncertain, as future events may differ materially from those projected, and past performance is not a guarantee of future performance. No investment strategy can guarantee a profit or avoidance of loss.

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