Kelsie Tabbert, CPA
Kelsie Tabbert, CPA
Preserving Your Family's Wealth

Preserving Your Family's Wealth

Many individuals spend their lives working hard to accumulate wealth to provide for their family and pass on their wealth to future generations. Without careful and thorough estate planning, your accumulated wealth given to your heirs could be substantially reduced due to estate and gift tax. Active planning should be taken to ensure this wealth stays within your family for generations in the most efficient and effective way possible.

Under current tax law, individuals can die with $11.95 million ($23.9 million for a married couple) and not pay a dime of the estate tax. This very generous lifetime exemption doubled in 2018 from $5.49 million ($10.98 million) and is set to drop back down again in 2026. If the value of your estate meets or exceeds the current lifetime exemption, estate and succession planning can maximize wealth preservation and minimize the tax your heirs must pay to Uncle Sam on your behalf. A multitude of estate planning tools are at your disposal and can work to accomplish a variety of needs.

Strategic gifting is one of the most effective methods used to transfer assets out of your estate to your beneficiaries, as well as shelter your assets from estate tax. Under current tax law, individuals can gift $15,000 annually to another individual, estate, and gift tax-free. For most high wealth individuals, gifting away assets using this annual exclusion threshold may not be enough to effectively transfer your wealth by the time you pass away. Consulting an estate attorney or CPA to assist you with these gifts, will help you transfer assets to your heirs efficiently and effectively.

Deciding which assets get transferred, when they get transferred, and in which method they are transferred, involves strategic and careful planning. Liquidity, asset growth potential, and ease of transferability, all play a role in strategic gifting.

If you expect to owe estate tax when you die, access to liquid assets becomes essential. If a substantial part of your estate is comprised of illiquid assets, the burden of obtaining sufficient liquidity to pay the estate tax is now on your descendants. Prioritizing the gifting of illiquid assets such as real estate or business, investments can ensure that liquid assets remain in your estate so that, when you pass away, your estate retains sufficient liquidity to pay the tax bill.

Another particularly important consideration in strategic gifting is an asset's growth potential. Estimating how much and how quickly an asset is expected to increase in value helps identify and prioritize which assets should be gifted and sheltered out of the estate. If an asset has significant growth potential, such as prime real estate or an expanding business, it is often beneficial to gift those assets as soon as possible. As stated earlier, individuals can leave $11.95 million to their descendants without being subject to estate tax.

Additionally, $11.95 million is also the value of assets you can gift away during your lifetime without being subject to gift tax. The gift and lifetime exclusion are one in the same in that, as you gift assets out of your estate, you use up and erode away the lifetime exemption.

If an asset is expected to increase in value, gifting the asset and getting it out of your estate before it significantly increases in value will allow you to use up less of your exemption than if you would have kept it in your estate and were forced to gift it away to your descendant's at the value
on your date of death.

Gifting the asset while it is still relatively low in value minimizes the amount of lifetime exemption you must use to make the gift and will allow the asset to grow in value in the hands of your beneficiaries. Now, you may be hesitant to gift away assets during your lifetime because your beneficiaries are too young or perhaps not mature enough yet to take on the responsibility of gaining access to high-value assets.

Don't worry. Through the use of trusts, you can accomplish strategic gifting and give away the assets on your own terms and conditions. Trusts are a versatile and customizable estate planning tool used to designate who receives benefit from the trust (beneficiary), who has control of the trust (trustee), and the stipulations of which the trust assets can be used. Trusts can be simple or complex depending on your needs or desires and can allow you to leave assets to your heirs subject to your explicit instructions.

With strategic gifting, you can efficiently gift away your estate and minimize the impact of estate taxes, ultimately preserving your wealth for future generations. Call our office at 210-829-1300, to schedule a meeting to discuss your a current estate plan and see how ADKF can service your estate and succession planning needs.

is the largest, locally owned public accounting firm in San Antonio, Texas, with branch offices in Boerne and New Braunfels. We have been serving our community since 1991. We are a full-service CPA firm dedicated to providing a broad range of tax, audit, bookkeeping, tax controversy, and consulting services with superior customer service to help our clients meet their goals and objectives. Please click here to set an appointment with us.

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