Legacy planning and estate planning are inseparable.
With less than one month until Tax Day, individuals and businesses have been immersed in reviewing their financials.
Some have likely found they strategically allocated their funds to maximize their tax benefits.
Others likely discovered they will be hit with a significant and avoidable tax bill.
Yikes!
Although it is impossible to change the past, people can take action now to improve their financial outcomes in the future.
According to a recent JD Supra article titled "2024 Estate Planning Opportunities," this coming year will present numerous tax, legacy, and estate planning opportunities.
Tax exemption differences between 2023 and 2024 will impact legacy planning.
Both individuals and families have various options available for the use of tax exemptions in 2024.
With tax laws and exemptions changing in the near future, focusing on these areas now can prove beneficial.
The estate, gift, and generation-skipping transfer (GST) tax exemption was increased in 2024 to adjust for inflation.
How much is it now?
The exemption amount is now $13,610,000 per person.
In short, it increased by $690,000 from 2023.
What does this mean for legacy planning?
Couples and individuals can transfer assets to heirs or into trusts with reduced tax implications.
If you have already used a part of your exemption previously, you have an additional buffer for protecting assets from future estate taxes.
The annual gift tax exclusion is separate from the estate, gift, and generation-skipping transfer (GST) tax exemption.
How is it different?
The annual gift tax exclusion allows individuals to give up to a certain amount to unlimited recipients without triggering a gift tax or needing to file a gift tax return.
In 2024, the exclusion amount was raised to $18,000 per person.
By using the annual gift tax exclusion limit to give to loved ones while alive, you can benefit your legacy planning by providing for loved ones now and reducing your taxable estate.
You can thus transfer significant wealth tax-free each year.
For those who desire philanthropy to be a part of their legacy planning, charitable remainder trusts (CRT) are great tools.
How do charitable remainder trusts work?
With a charitable remainder trust, you can fund the trust with assets.
The trust will then pay you and other designated beneficiaries a fixed income for your life or a set number of years.
After the designated period of time, the trust is terminated, and the assets are donated to a designated charity.
This is a particularly beneficial tool for legacy planning as it reduces your taxable estate, provides a steady income, and supports a good cause of your choosing.
The initial transfer of funds to a charitable remainder trust may also qualify for a charitable income tax deduction.
This year allows for strategic giving with increased exemptions, a higher annual gift tax exclusion threshold, and philanthropic opportunities.
Strategic Gifting with Increased Exemptions:
The higher exemption threshold allows you to utilize strategic giving to transfer some assets now to avoid future tax burdens.
Utilize the Annual Gift Tax Exclusion:
Gifting up to $18,000 to each loved one this year can reduce your taxable estate while supporting loved ones in their current needs.
Incorporate Philanthropy into Your Estate Plan:
Charitable remainder trusts allow you to provide for yourself and a charity while maximizing tax benefits.
As a result, you can honor your values while simultaneously providing for your loved ones.
In conclusion, you can strategically use the tax benefits available in 2024 to support your loved ones and non-profits.
Legacy planning is something you can take actionable steps toward now.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
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