When we reflect on our future, we often think about the best way to optimize our wealth. With thoughtful planning today, we can enjoy a stress-free financial future while caring for family and contributing to our charitable passions. You may want to plan for your children’s college tuition, pay for long-term care for aging parents, or give generously to your favorite charity. Early financial strategies allow us to take care of the people and causes that matter to us most.

Regardless of what’s important to you, maximizing your wealth can be at odds with the type of assets you hold, such as a highly valuable business that is not very liquid. A significant amount of highly appreciated low-basis stock could also pose challenges. Conversely, high-basis assets that are projected to grow rapidly inside the estate are just as challenging. Estate tax laws may make it challenging to optimize the impact of your wealth and the Why Behind the Money.

The current estate tax exemption for 2021 is $11.7MM per person, double from $5.6MM before the 2018 Tax Cuts and Jobs Act (TCJA). The provision is currently scheduled to sunset and revert to the original $5.6MM in 2025, if not sooner or even lower thresholds. While the current estate tax rate takes a 40% bite out of the estate’s value above the exemptions, it is still at historic lows compared to the 55% rate in 2001. 

However you’ve found financial success, the same question remains. How do you maximize the wealth you’ve accumulated? There are several questions to consider when making a plan, but the most important question is What matters to you most. The answer will help you decide between strategies that can help offset some big tax hits resulting from selling a business, liquifying assets, or planning care for a relative.

If you contribute to charities annually, you may be running into AGI limits on your gifts. Charitable Trusts may help provide some benefits by allowing additional gifting and providing a vehicle to help with the overall estate plan while minimizing the impact of the estate tax. Variations of Grantor Retained Trusts may be an option for people who wish to pass their wealth to their children rather than a charity. 

Life Insurance can also play a significant role in your strategy. It can help with liquidity at the end of your plan to offset estate taxes or help equalize your estate among your beneficiaries. For example, only one adult child may express interest in taking over the family business while other siblings have no interest. The family business may be the bulk of the estate and not highly liquid due to the specialization of the service or product. Insurance could help provide both liquidity and equalization of the estate among the beneficiaries.

Depending on the types of assets you have, planning strategies exist for low basis assets, high growth assets, or illiquid assets such as a family business. A skilled team of professionals, including a CPA, Estate Attorney, and CERTIFIED FINANCIAL PLANNER can help you devise strategies to help you maximize your wealth.

Ready to start planning for a brighter future? Call today at (408) 840-4030, or contact our team online.