KDP Wealth has the knowledge and experience to ensure our clients don’t pay higher than necessary estate taxes. With our extensive tax proficiency, we help clients manage their tax efforts, optimizing the value of their wealth distributions.

Today, far less than 1% of estates owe any federal estate tax. However, as you plan for a comfortable retirement, your assets may increase in value and exceed the threshold. Furthermore, there is significant uncertainty regarding the continuation of the high threshold implemented as part of the Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act increased the 2024 threshold for federal estate taxes to a gross estate of $13.61 million for an individual filer and $27.22 million for a married couple filing jointly. 

This provision of the Tax Cuts and Jobs Act expires in 2025. If Congress does not extend it, the threshold will revert to the prior, much lower cutoff of $5.49 million. For estates exceeding the threshold, the tax levy ranges from 18% to 40%, depending on the amount over the threshold.

Taxpayers can employ specific tools to reduce the amount of their estate subject to the estate tax. Our advisors will discuss these options with you as part of our tax-focused wealth accumulation and preservation strategy. 

Lifetime Gifting Strategies

Federal estate tax is imposed on transferring wealth from a deceased person to their heirs. The amount subject to tax is the fair market value sum of everything you own or have an interest in at the time of death. That total is your gross estate, including cash, securities, real estate, insurance, businesses, trusts, annuities, and other assets. 

Irrevocable Trusts

Establishing irrevocable trusts can be an effective way to remove assets from a taxable estate. Advisors can help clients explore options such as:

• Grantor-Retained Annuity Trusts (GRATs): These trusts allow clients to transfer appreciation on assets to beneficiaries while retaining an income stream.
• Intentionally Defective Grantor Trusts (IDGTs): These trusts can freeze the value of assets for estate tax purposes while allowing the grantor to continue paying income taxes on trust earnings.

Charitable Giving

Advisors can help clients incorporate charitable giving into their estate plans, providing tax benefits and fulfilling philanthropic goals. This approach may incorporate establishing charitable remainder trusts, also commonly referred to as charitable lead trusts, creating donor-advised funds, and participating in qualified charitable distributions from IRAs.

Life Insurance Strategies

Life insurance can be a powerful tool in estate planning. Advisors can help clients structure life insurance policies within irrevocable life insurance trusts (ILITs) to provide liquidity for estate taxes without increasing the taxable estate.

Family Limited Partnerships (FLPs)

FLPs can transfer business interests or investment assets to family members while maintaining control and potentially applying valuation discounts for estate tax purposes.

Qualified Personal Residence Trusts (QPRTs)

For clients with valuable real estate, QPRTs can be an effective way to transfer a primary residence or vacation home to beneficiaries at a reduced gift tax cost.

Portability Planning

Married clients can take advantage of portability, which allows a surviving spouse to implement any unused portion of their deceased spouse's estate tax exemption.