Estate Planning Archives

Understanding Gifting Rules, Tax Implications, and Wealth Transfer Planning

Gifting plays a crucial role in wealth transfer planning, allowing individuals to support loved ones, fund education, and optimize their estate plans. As a financial advisor, understanding and discussing gifting strategies with your clients is essential, particularly with the potential tax law changes set to take effect at the end of 2025.

The Tax Cuts and Jobs Act (TCJA) significantly increased the lifetime gift and estate tax exemption, but these provisions are set to sunset after 2025, reverting to pre-2018 levels. While the Trump Administration is pushing to make these tax cuts permanent, high-net-worth clients who haven’t yet taken advantage of the elevated exemptions may still want to consider accelerating their gifting plans.

Here’s what advisors need to know to guide their clients through the complexities of gifting and help them optimize their wealth transfer plans.

Understanding the basics of gifting rules and exemptions

To effectively guide clients, advisors must grasp the basics of gifting rules and exemptions:

Annual exclusion: In 2025, individuals can gift up to $19,000 per recipient without triggering gift tax reporting. Married couples have the ability to combine their annual exclusions to gift up to $38,000 per recipient. This amount is indexed for inflation and may increase in future years.
Lifetime gift tax exemption: The current lifetime gift tax exemption is $13.99 million per individual in 2025 but is set to revert to an estimated $7 million (adjusted for inflation) after 2025 if the Tax Cuts and Jobs Act sunsets.
Gift tax reporting: Gifts exceeding the annual exclusion may require filing Form 709, even if no gift tax is ultimately owed due to the lifetime exemption.
Unlimited gifting exceptions: Direct payments for educational expenses (tuition only) and medical expenses are exempt from gift tax limits. This means that paying a grandchild’s college tuition or a parent’s hospital bill should not typically count towards the annual exclusion or lifetime exemption.
Estate tax interplay: Taxable gifts made during life reduce the available estate tax exemption at death. This creates an interconnected planning dynamic, where lifetime gifts and bequests at death must be strategically balanced.

Tailoring gifting approaches to client wealth goals

Effective gifting strategies often vary based on a client’s wealth level and goals. Here’s a high-level breakdown:

Mass affluent clients ($5M or less)

For clients with more modest estates, consider these simpler gifting strategies:

Direct family gifts: Annual exclusion gifts of cash, property, or other assets to children, grandchildren, or other relatives can help support their financial needs while incrementally reducing the taxable estate.
Education funding: Contributing to 529 plans for children or grandchildren’s education qualify for the annual exclusion, and some states offer additional tax deductions or credits. Plus, the assets grow tax-free if used for qualified education expenses.
First-time homebuyer assistance: Helping family members with down payments on a first home is a popular gifting strategy. These gifts can be structured as annual exclusion gifts, or larger amounts can be reported as taxable gifts using the lifetime exemption.
Charitable giving: Modest charitable gifts, whether direct donations or through donor-advised funds, can provide income tax deductions and reduce the taxable estate.

High-net-worth clients (Over $5M)

Wealthier clients, especially those with estates exceeding the current lifetime exemption amount, may benefit from more advanced gifting structures:

Irrevocable trust strategies: Grantor Retained Annuity Trusts (GRATs) can transfer appreciating assets to beneficiaries with minimal gift tax impact. Irrevocable Life Insurance Trusts (ILITs) remove life insurance proceeds from the taxable estate. Charitable Remainder Trusts (CRTs) provide an income stream to the grantor while benefiting charity and reducing the taxable estate.
Family limited partnerships (FLPs): FLPs pool family assets under a central entity and allow for discounted gifting of partnership interests.
Dynasty trusts: These long-term trusts are designed to minimize estate and generation-skipping transfer taxes over multiple generations.
Charitable giving: Private foundations and charitable lead trusts allow for more specific philanthropic impact while offering estate and gift tax benefits.

Navigating the tax landscape of gifting

Gifting strategies can have large tax implications that advisors must help clients navigate:

Basis considerations: Gifted assets generally retain the donor’s cost basis (known as “carryover basis”), which can lead to larger capital gains taxes for recipients if the assets are later sold. Inherited assets that have appreciated typically receive a “stepped-up basis” to fair market value at the owner’s death, potentially reducing capital gains for heirs.
Generation-skipping transfer (GST) Tax: Gifts to grandchildren or later generations (known as “skip persons”) may trigger an additional 40% GST tax without proper allocation of the GST exemption (which currently mirrors the gift and estate tax exemptions).
State-specific issues: Some states also impose their own estate or inheritance taxes with exemptions far below the federal amount. States may have separate gift taxes.
Income tax implications: Certain gifting strategies, such as transferring appreciated assets or creating grantor trusts, can impact the donor’s income tax situation. For example, income generated by assets in a grantor trust is taxed to the grantor, not the trust itself.
Timing considerations: Advisors should help clients time gifts strategically. For example, gifting appreciating assets early shifts future growth out of the taxable estate. With the potential impending reduction of the gift and estate tax exemptions in 2026, planning to utilize the higher exemptions before they sunset could yield significant tax savings.

Debunking gifting myths: What clients need to know

Navigating gifting strategies can be complicated, and clients often have misconceptions that advisors must address:

Clients may not realize that some gifts need to be reported even though they are under the lifetime exemption amount. It is important that clients are aware of their tax reporting obligations, even if it will not actually result in a tax liability being due.
Some clients confuse gift tax and estate tax rules, not understanding that taxable gifts during life also reduce the available estate tax exemption at death. Others may think that all gifts are inherently taxable or that only cash gifts need to be reported.
Clients often don’t realize that indirect gifts, like paying a family member’s expenses or forgiving a loan, can count as reportable gifts. Helping with a down payment, covering medical bills (if paid directly to the provider), or even adding a joint owner to a bank account all have potential gift tax implications that need to be properly tracked and reported.
The difference between “carryover basis” for gifts and “stepped-up basis” for inheritances is a frequent point of confusion. Clients may not know how gifting an appreciated asset during life can lead to higher capital gains taxes for the recipient compared to leaving that same asset as a bequest at death.

To help clients visualize potential gifting scenarios and their impact, consider leveraging Wealth.com’s Scenario Builder. While advisors cannot provide legal advice, tools like this can help inform and guide client conversations.

Conclusion

Gifting is a powerful wealth transfer strategy that requires careful planning. By understanding the fundamentals, optimizing for tax implications, and addressing common misconceptions, advisors can help clients navigate the complexities of gifting.

Remember, the advisor’s role is to educate, guide, and facilitate these conversations, not to provide legal advice. Encourage clients to consult with estate planning attorneys and tax professionals to implement their specific strategies.

As tax laws continue to evolve, advisors who engage clients in gifting discussions will differentiate themselves and provide immense value. Your clients will appreciate your initiative in helping them navigate this complex — but essential — aspect of their financial lives.

How to Fund a Trust: Key Steps and What to Consider

Creating a trust is a critical part of estate planning, but a trust is only effective if it’s properly funded. Without the right funding, even the most meticulously drafted trust can fail to achieve its intended purpose, leaving clients vulnerable to probate and other issues they specifically sought to avoid. In this guide, we’ll explain what it means to fund a trust, why funding a trust is so important, and key considerations for funding different types of assets.

What does it mean to fund a trust?

“Funding a trust” involves transferring ownership of your assets from yourself as an individual into your trust. Once the assets are owned by the trust, the trust controls those assets, based on the rules you’ve established in the trust document.

It’s important to note that creating a trust and funding a trust are two separate steps. Creating a trust happens when your client is setting up their estate plan. But funding the trust is the crucial next action—and one where you, as their financial advisor, can add immense value. Even if an attorney created the trust, they may not be deeply involved in the actual funding process.

Funding a trust typically involves:

Retitling assets like real estate and vehicles to be owned by the trust
Updating beneficiary designations on accounts like life insurance and retirement plans to name the trust
Assigning personal property like jewelry, art, and furniture to the trust according to a schedule

Why funding a trust matters

A trust only controls the assets it owns. An unfunded trust—sometimes called an “empty” trust—provides little to no benefits and may even defeat the purpose of creating it in the first place. Some key reasons to fund your trust include:

Avoiding probate: One of the main reasons to establish a revocable living trust is to avoid probate, which can be time-consuming, expensive, and public. But only assets titled in the name of the trust (or those passing via another method, such as beneficiary designation) bypass probate.
Protecting your assets: Trusts can provide protection against creditors, lawsuits, divorce, or mismanagement by beneficiaries. Plus, unlike wills, which become public documents during probate, trusts generally maintain privacy. However, this privacy and protection advantage only extends to assets properly placed in the trust. Assets that pass through probate may become part of the public record.
Maintaining control: With a trust, you can specify exactly how and when your assets should be distributed to your beneficiaries. But the trust can only control the assets you’ve placed into it.
Planning for incapacity: If you become incapacitated, your trustee can typically seamlessly step in to manage the trust assets on your behalf — but only for assets that were properly funded into the trust.

What to know about funding a revocable trust

It’s important for clients to understand that funding a revocable trust does not remove the assets from their taxable estate—unlike many irrevocable trusts which do often remove assets from the taxable estate. Your clients typically still maintain control over the assets placed in the revocable trust and can amend or revoke the trust at any time.

Some clients may worry that transferring assets to a revocable trust means giving up ownership of those assets. Reassure them that this is not typically the case—they will likely maintain full control, but the trust now holds legal title.

Not all assets should be placed in a revocable trust. Assets that already have named beneficiaries, like retirement accounts and life insurance policies, can often be left out of a trust without being subject to probate. Of course, it’s always smart to consult an estate planning attorney to determine if a particular asset should be moved into the trust. Wealth.com’s Attorney Network can be a valuable resource for these decisions.

When to fund a trust

Most assets can and should be transferred into the trust as soon as possible after the client creates it. Funding the trust promptly ensures the assets are protected in the event something happens to the client. It may also be easier for clients to follow through on funding sooner rather than later.

This approach immediately provides probate avoidance benefits and allows for simpler management if the individual were to become incapacitated. Funding during the grantor’s lifetime also gives them time to address any complications that arise and offers a chance to refine any funding strategies.

Some assets cannot or should not be placed in a revocable trust during life but can be directed to the trust at death through a “pour-over” will that catches any unfunded assets, beneficiary designations that name the trust or TOD/POD designations to the trust.

For certain assets like IRAs and 401(k)s, the tax implications of transferring to a trust during life may outweigh the benefits. These assets typically remain outside the trust during the grantor’s life but may name the trust as a beneficiary upon death, depending on the specific situation.

How to fund a trust: by asset type

Different asset types require different approaches to funding. Let’s examine the most common assets and how to effectively transfer them into a trust.

Real estate

Real estate is often among a client’s most valuable assets, making proper transfer into their trust particularly important.

How to fund:

Create and record a new deed transferring the property to the trust
Update title insurance policies
Notify homeowner’s insurance companies of the change in title
For properties with mortgages, check for due-on-sale clauses (though most residential mortgages exempt transfers to revocable trusts)

While transferring real estate to a trust doesn’t typically impact your mortgage or insurance, it’s smart to check with your attorney and providers to confirm. For out-of-state properties, you may want to work with a local attorney familiar with that state’s requirements. When transferring real estate to a trust, always make sure that property tax exemptions won’t be affected.

Bank accounts and brokerage accounts

Financial accounts are typically simple to transfer to a trust but require the right documentation.

How to fund:

Complete the financial institution’s account retitling forms
Provide the Certification of Trust or similar document
Update direct deposits and automatic payments as needed

Keep in mind that some institutions may require a new account number. For joint accounts, the couple should decide whether to maintain joint ownership or separate into individual trust accounts. You’ll also want to pay attention to FDIC insurance limits, as trust ownership can sometimes increase coverage. The current FDIC limit is $250,000 per person, per account, per ownership category.

Personal property

Tangible personal property includes furniture, jewelry, art, collectibles, and other household items.

How to fund:

Execute an assignment of personal property to the trust
For high-value items with titles (boats, cars), retitle into the trust name
Create an inventory of items for the trust records

Keep in mind that vehicles may be difficult to transfer in some states due to registration issues. You’ll also want to make sure you’re updating insurance policies for items transferred to the trust. For valuable collections or artwork, consider getting an appraisal before transferring to the trust. This establishes a baseline value and can help with later tax decisions.

Business interests

Transferring business interests requires extra consideration of any tax implications, operating agreements, and succession planning.

How to fund:

For sole proprietorships, execute an assignment to the trust
For partnerships, LLCs, or corporations, transfer ownership interests according to the entity’s governing documents
Update stock certificates, membership certificates, or partnership records

Before transferring any business interest to a trust, review the operating agreement or bylaws with the client’s attorney to make sure the transfer won’t trigger unintended consequences or buyout provisions.

Retirement accounts

Retirement accounts like IRAs and 401(k)s present an extra challenge due to their tax treatment.

How to fund:

Generally, retirement accounts should NOT be transferred to a trust during the owner’s lifetime, as this can trigger immediate taxation
Instead, consider naming the trust as a beneficiary

Keep in mind that the SECURE Act has significantly changed the rules for inherited retirement accounts. Trust provisions must be carefully drafted to optimize tax treatment for trust beneficiaries. For married couples, spousal rollovers often provide better tax treatment than having the account flow through a trust.

When naming a trust as a beneficiary of retirement accounts, there are various considerations to take into account that could affect the administrative burden and tax liabilities that could result. For example, one consideration is making sure the trust includes a ‘see-through’ provision that allows for required minimum distributions to be calculated based on the beneficiaries’ life expectancies.

Life insurance and annuities

Life insurance and annuities pass by beneficiary designation and typically remain outside the trust during the owner’s lifetime.

How to fund:

Consider naming the trust as beneficiary rather than transferring ownership
For specific estate planning needs, a specialized irrevocable life insurance trust (ILIT) may be more appropriate

Keep in mind that changing ownership of policies may have gift tax implications, and that some annuities may have surrender charges if ownership is transferred. Make sure you review life insurance beneficiary designations regularly, as many clients inadvertently nullify trust planning by naming individuals directly rather than their trust.

What if a couple has individual trusts?

For married couples who have decided to create individual trusts rather than a joint trust, they’ll need to decide how to divide their assets between the two trusts.

There may be strategic considerations when dividing assets — like if one spouse is more susceptible to litigation or creditor issues (like a business owner) or if one is more likely to need long-term care (and may want to plan for Medicaid eligibility).

Here are a few additional tips:

Community property may need to be converted to separate property before being funded into individual trusts
The division of assets should align with each spouse’s estate planning goals
Make sure beneficiary designations on non-trust assets align with the overall estate plan

How financial advisors can help with trust funding

While an attorney may have been involved in the drafting of the trust documents, they may not provide the full guidance on funding. Many clients are left with the impression that their estate plan is complete after signing the trust, not realizing that funding is a separate and crucial step. Financial advisors can help by:

Creating an inventory of assets. Help clients identify all assets that should be considered for trust funding.
Developing a funding strategy. Work with the client’s attorney to determine which assets should be transferred to the trust and which should use beneficiary designations.
Assisting with financial account transfers. Guide clients through the process of retitling bank and investment accounts.
Monitoring funding progress. Create a tracking system to ensure all intended assets are properly transferred.
Conducting periodic reviews. As clients acquire new assets or experience life changes, review and update the funding plan accordingly.

If questions arise, you can always help the client consult an attorney, such as one through Wealth.com’s national Attorney Network.

Conclusion

Trust funding is an essential part of estate planning, yet it remains one of the most frequently overlooked aspects. By understanding the processes of trust funding, advisors can provide more robust assistance to their clients, helping them avoid costly mistakes and make sure their estate plans work as intended.

Remember that trust funding is not a one-time event, but an ongoing process that requires regular monitoring. By incorporating trust funding reviews into your service model, you can strengthen client relationships and deliver more holistic financial guidance.

How AI Can Make Estate Planning More Human

How to Keep Generational Clients: Engaging Both Spouses in Estate Planning

Introducing Scenario Builder: A Better Way to Model Estate Planning Strategies

How to Help Clients Fund Their Trusts and Avoid Costly Mistakes

Flexible Estate Planning For Uncertain Times

Reflection & Momentum: 2024 in Review and What’s Ahead for 2025

2024 was a groundbreaking year for wealth.com, revolutionizing how wealth managers and estate planning come together through innovative technology. As the Great Wealth Transfer continues, estate planning has become essential for advisors aiming to elevate client satisfaction and engage the next generation.

Our success is thanks to our growing network of wealth management and advisor partners who trust in the power of estate planning and wealth.com’s ability to deliver for them and their clients.

To our clients, partners, and the wealth management community we connected with: thank you for making 2024 unforgettable. The entire wealth.com team is dedicated to continually innovating and improving the estate planning experience, and we can’t wait to show you what we’re working on in 2025.

First, here’s a look back at our highlights and accomplishments from the past year:

2024 was a year of innovation, recognition and growth

The wealth.com team hit the ground running in 2024. We doubled down on innovation, consistently releasing product features to improve the estate planning process for advisors and having life-changing impacts for their clients.

Our hard work was rewarded with recognition from industry leaders and wealth.com was firmly established as the leading digital estate planning platform.

We also attended and spoke at events across the country, worked closely with fantastic partners within the industry, grew our Practical Planner podcast and more—culminating in a Series A led by Google Ventures and other leading tech investors.

How to Manage Real Estate and Property Assets in an Estate Plan

Real estate is often one of the most valuable assets in a person’s estate. Whether it’s your primary residence, a vacation home or an investment property, it’s important that your real estate is properly accounted for in your estate plan. Failing to do so could lead to a lengthy probate process, unexpected taxes for your heirs or even the loss of a family property.

For many people, placing real estate into a trust can be the best solution. Doing so allows the property to avoid the time-consuming and public probate process. It also ensures the real estate will seamlessly pass on to your beneficiaries according to the terms you’ve outlined in your trust.

This article will detail what to consider about properties and real estate, and the potential options for incorporating those assets into an estate plan.

Why planning ahead for property in estate planning matters

Real estate is not like other assets. It can’t be easily divided up and distributed to heirs like cash in a bank account.

Real property must go through a legal transfer of title to pass ownership to the next generation. Without proper planning, this transfer process can become complicated and complex for beneficiaries.

Here’s why you want to have a process in place:

1. Avoid probate: Any assets that are not in a trust when you pass will likely have to go through probate. This is true of any real estate or properties too. During probate, your beneficiaries will not have access to the property, including rental properties. Your estate will still go through probate even with a will in place, though it should make the process smoother.

2. Minimize taxes: Without proper preparation, your heirs could be hit with a hefty tax bill when they inherit your real estate. While the federal estate tax exemption is high ($13.99 million per individual in 2025), several states may have their own estate or inheritance taxes with much lower thresholds. Proper estate tax strategies for your real estate can help minimize or, potentially, eliminate this.

3. Clarify your wishes: Real estate often has sentimental value in addition to monetary value. Perhaps it’s the home where your children grew up or a lakeside house where extended family has gathered for summer vacations. Putting your wishes in writing can prevent arguments between family members, specifying whether it should remain in the family or if sale proceeds are to be split among beneficiaries.

4. Plan for incapacity: An estate plan doesn’t just address what happens after you die. It should also protect you and your assets during your lifetime, in the event you become incapacitated by illness or injury. Let’s say you own a rental property that provides a stream of income. If you were to suddenly become unable to manage the property, who would handle tasks like collecting rent, paying property taxes and coordinating repairs? Without a Financial Power of Attorney in Place, your family would have to petition the court to appoint a guardian—an expensive and stressful process.

How to pass real estate to your beneficiaries

Let’s look at some of the different ways you can pass property to your heirs.

Leave it in your will

The most basic option is to name the beneficiary for each piece of real estate in your will. Upon your death, the executor of your estate will be responsible for ensuring the property is formally transferred to the new owner.

The downside of using a will is that the property will have to go through probate before your beneficiary can take ownership.This can be a time-consuming process, and your heirs will likely need to hire an attorney to navigate the legal complexities, resulting in additional costs and delays

Form a limited liability company (LLC)

If you own rental properties or real estate used for a business, you might consider transferring those properties into a limited liability company (LLC). An LLC provides liability protection, shielding your personal assets if someone were to sue over something that occurred on the property. An LLC may also provide tax benefits.

Once the LLC is created and funded with your real estate, you can leave the corporate shares to your beneficiaries in your will or trust. Upon your death, they will inherit ownership of the LLC and the real estate it holds.

Placing rental properties into an LLC also allows your beneficiaries to easily split ownership of the real estate after your passing. Rather than arguing over who gets which property, they will each own a percentage of the LLC. If one heir wants to be bought out, the others can purchase their corporate shares.

Put it in a trust

A Revocable Trust is often the preferred method for leaving real estate to your beneficiaries. Here’s how it works: You create the trust and name yourself as the trustee. Then you transfer ownership of your real estate into the trust by filing a new deed.

The core action involved in transferring real estate into a trust is to change the title of the property. Currently, you likely hold the title to your real estate holdings in your own name (or jointly with a spouse). To place it in a trust, you’ll need to retitle it in the name of the trust itself.

This retitling keeps the property out of probate upon your death. Instead of going through the probate process, the real estate will immediately pass on to your beneficiaries and be handled according to the instructions you’ve laid out in your trust documents. The trustee you’ve appointed will be responsible for managing the property and transferring it to your heirs as specified.

Trusts provide a great deal of flexibility and control over how your real estate is managed and distributed. You can specify that a property be sold immediately, held for a certain number of years or kept in the family for generations. You might stipulate that a beneficiary can live in a home rent-free or that rental income be used to pay for a grandchild’s college education.

It’s important to note that transferring real estate into a Revocable Trust does not remove it from your taxable estate. However, an Irrevocable Trust can be used to minimize estate taxes for high net worth individuals. Since irrevocable trusts cannot be easily changed once they are funded, they are usually used in conjunction with, not as a substitute for, a Revocable Trust.

Common concerns

Many people worry that retitling property into a trust will impact things like property taxes, insurance coverage or mortgage terms. Fortunately, in most cases, this is not an issue. The transfer does not constitute a sale or change in ownership, so property tax assessments and exclusions like Proposition 13 in California remain unaffected.

Similarly, your existing homeowners insurance policy and mortgage should remain valid and unchanged, although it’s prudent to notify your insurance provider and mortgage lender of the title change so they can update their records. At most, they may have you sign a trust rider agreement.

What married couples should consider

For married couples, there are two common options when it comes to placing real estate in a trust:

Retitle the property to be owned 50% by each spouse’s individual trust. This allows each person to specify their own beneficiaries and terms for their half of the property.
Create a joint trust and place full ownership of the property into that single trust. The couple will need to agree on beneficiaries and terms in the joint trust.

There are pros and cons to each approach that are worth discussing with an estate planning professional. If a couple opts for a joint trust, they should consider what will happen to the property if they divorce in the future.

What happens to real estate not placed in a trust?

Any real estate that you opt not to retitle—or simply forget to retitle—into your trust will have to go through the probate process before it can pass on to your heirs. Probate can be a lengthy and expensive process, and it makes the transfer of the property a matter of public record.

There are some alternatives to trusts that may still allow you to avoid probate for certain property (more on that below), but in general, if you do nothing, your real estate holdings will be subject to probate.

Recording the retitling with a deed

To officially transfer your real estate into a trust, you’ll record a new deed with your county recorder’s office showing the trust as the owner.

Typical deeds used for this purpose include grant deeds, warranty deeds or quitclaim deeds, depending on your location and situation. Your financial advisor or estate attorney can advise on the proper format. The deed will include a detailed legal description of the property being transferred.

Most counties no longer require you to obtain a physical copy of the new deed. Digital recordings are sufficient—you can typically complete the whole process online through your county recorder’s website.

Regional variances in requirements may apply. For instance, Massachusetts does not require you to provide a full copy of your trust agreement when transferring property. Instead, you record a separate trustee certificate along with the new deed.

Alternatives to trusts for passing on real estate

While placing real estate in a trust is an effective way to efficiently transfer it to heirs outside of probate, there are some alternative methods options.

Transfer on Death deeds

Some states allow you to set up a “Transfer on Death” (TOD) deed that automatically transfers ownership of a property to your designated beneficiary upon your death, without the need for a trust or probate.

The TOD deed lists your chosen beneficiary but doesn’t give them any ownership rights until your death. You can change the beneficiary at any time.

This can be a good option for people who only want to specify what happens to their property after death and aren’t concerned about the other benefits trusts provide during their lifetime. But if this is appealing, look into whether TOD deeds are valid in your state.

Life Estate deeds

With a life estate deed (sometimes called a “ladybird deed”), you grant yourself ownership of a property for the rest of your life, and then specify the person you want to inherit the property after you pass away.

This gives you the right to continue living in or renting out the property for your lifetime. Your named beneficiary (legally known as the “remainderman”) automatically inherits the property upon your death without the need for probate.

However, life estate deeds can create complications if you want to sell the property, since the remainderman also has an ownership interest and would need to agree to the sale. Additionally, depending on how long you live, it could impact the capital gains tax your heirs will owe when they eventually sell the property.

Making a property your primary residence for at least two out of five years prior to selling provides a significant capital gains tax exclusion—an advantage your heirs may not qualify for if they inherit through a life estate deed

Here’s a simple chart to help understand these different options:

Chart that details the different ways to manage real estate in an estate plan, including potential tax benefits and if it avoids probate

Advanced strategies for estate tax planning

While trusts and careful planning can help minimize taxes for most estates, individuals with large estates, valuable properties, or unique circumstances may benefit from advanced strategies. One such option is the Qualified Personal Residence Trust (QPRT), which offers specific tax advantages.

With a QPRT, you place your property into an Irrevocable Trust for a set length of time, while continuing to live in it. Once the term ends, the property transfers to your beneficiaries (usually your children).

The advantage is that the property is valued for gift tax purposes at the time it’s placed into the trust, not at its value when it eventually transfers. So a $2 million property placed in a 10-year QPRT might only count as a $1.2 million gift, reducing your taxable estate.

The catch is that if you die before the QPRT term ends, the property will revert back to your taxable estate. Planning based on your age, life expectancy, and desired length of stay is required. QPRTs also cannot be revoked if your circumstances change.

Especially for high net worth estates, it’s worth consulting with an experienced estate planning attorney to determine if a QPRT or similar advanced strategy might be advantageous for your situation.

Why financial advisors are key to estate planning

Real estate and taxation issues are complex, but financial advisors have the expertise to guide clients through the nuances of incorporating real estate into estate plans. By offering informed, actionable advice, they help clients clarify their goals, navigate options and achieve peace of mind.

Advisors can assist clients by:

Understanding their goals: Who should inherit their properties? Are there specific conditions or sentimental attachments to certain real estate?
Assessing their portfolio: What is the value of their real estate holdings? How do these assets fit into their broader financial and estate planning objectives?

With this clarity, advisors can recommend tailored strategies, such as creating a trust, forming an LLC for rental properties or how to approach advanced tax planning techniques like a Qualified Personal Residence Trust (QPRT).

Are you a wealth manager? See how you can start helping their clients with their estate plans and property assets. Book a demo today.

New to Ester® Estate Extraction: Executive Summaries & Expansion to Irrevocable Trusts

Wealth.com is excited to announce major enhancements coming to Ester®, our proprietary AI legal assistant tool. These updates include a brand new Executive Summary, which is optimized to recognize the decisions made in even the most complex estate planning documents and displayed in a concise, easy-to-read summary.

Executive Summaries for estate documents

Ester®, Wealth.com’s industry leading AI legal assistant, is already solving a critical bottleneck for advisors when it comes to helping clients with their estate plans. Reviewing existing estate plan documents to pull out relevant information—which can often be upwards of 60 or 70 pages—can take hours, if not days of manual work. But with Ester, advisors are able to upload their clients’ documents and, within seconds, get a summary of all the key information.

Now, advisors can also access an Executive Summary of clients’ estate planning documents that includes a link to the exact page where information was identified. This Executive Summary automatically provides built-in talking points to facilitate the conversation with clients and review key decisions.

The Executive Summary will be available for:

NEW: Irrevocable Trusts (including GRATs, SLATs, ILITs, Dynasty Trusts, among others)
NEW: Advance Health Care Directives
NEW: Financial Powers of Attorney
Revocable Trusts
Last Will & Testaments (including Pour-Over Wills)

Redesigned Ester Visualizer Report

For Revocable Trusts and Last Will & Testament documents, the information that is pulled into the new Ester Executive Summary view is also fed instantaneously into a visualizer report. These distill the details of the extracted documents into visuals that clarify the complex details of the document. The new reports break down key people and entities identified in the client’s document, including grantors, trustees, executors and guardians, alongside how assets will be distributed and to whom, including recognizing income, principal and trust distributions.

Sample report pages:

Providing clarity on the complex for advisors and clients

Ester acts as your AI legal assistant, helping you to reduce hours of manual effort to deliver clients with clarity about their estate plans and unlock additional planning opportunities to progress forward with your client.

These new updates are currently being rolled out to new and existing Wealth.com customers over the coming weeks. To learn more about how Ester and Wealth.com can reimagine estate planning for your firm, book a personalized demo today.

What to Know About Putting Your Business in a Trust

As a business owner, you’ve poured your heart, soul, and countless hours into building your company. But have you taken the time to consider what will happen to your business if you become incapacitated or pass away? While it’s not the most comfortable topic to think about, properly planning future business ownership can help protect both your company’s future and your family’s financial security.

Whether you’re running a startup, managing a family business or hold equity in a private company, trusts can protect and transfer business interests that could be vital for their long-term success. Here’s how they work and what you need to know.

Why consider trust ownership for your business?

Many business owners default to keeping their business interests in their personal name, assuming they’ll deal with succession planning “later.”

But think about this scenario: You get sick, or have an accident, and are unable to continue to run your company. Who would make business decisions? While you might think a power of attorney would be enough, many financial institutions and business partners can reject or delay accepting power of attorney documents, especially if they don’t meet specific requirements.

A properly structured trust can create a more seamless transition of control, allowing your chosen trustee to step in and manage business affairs without disruption. This can be especially important if you are the sole owner or a key decision-maker.

Other reasons to consider a trust include:

Avoiding probate: When you pass away, assets held in your individual name typically must go through the probate process. This means your business details become public record, operations may face delays waiting for court approval and your estate could incur additional costs and administrative burdens. By transferring your business interests to a trust, you can bypass probate and ensure a smoother transition for your successors.
Succession planning: A trust allows you to specify exactly how you want your business to be managed and distributed upon your incapacity or death. You can name a successor trustee to oversee operations and provide detailed instructions for the eventual transfer of ownership to your chosen beneficiaries.
Asset protection: Depending on the type of trust and how it’s structured, placing your business in one may offer some degree of protection from creditors and lawsuits. This can be especially valuable if your company operates in a high-risk industry.
Estate tax planning: If your estate is likely to be subject to estate taxes, certain types of irrevocable trusts can be used to remove business assets from your taxable estate, potentially saving your heirs a significant tax bill.

Trusts can offer control and flexibility over your assets

One common misconception is that putting business interests in a trust means giving up control. In reality, trusts offer a way to maintain control while protecting assets and planning for succession.

For example, you might want your spouse to benefit financially from your business but prefer that operational decisions stay with your business partner. A trust can separate these economic and control rights, ensuring both goals are met.

Revocable vs. Irrevocable Trusts: What’s the difference?

When it comes to trust ownership of your business, you have two main options: Revocable Trusts and Irrevocable Trusts. Understanding the key differences can help you decide which type best serves your needs.

Revocable trusts

Also known as living trusts, revocable trusts can be modified or terminated by the grantor (the person who creates the trust) at any time. Here are the main features:

Flexibility: With a revocable trust, you maintain complete control over the assets and can change the trust terms, beneficiaries, or trustees whenever you wish. This can be ideal if your business is still in the early stages or you anticipate needing to adjust your plan over time.
Incapacity protection: If you become unable to manage your business due to illness or injury, your chosen successor trustee can seamlessly step in to handle day-to-day operations and major decisions per your instructions.
Probate avoidance: Assets held in a revocable trust bypass the probate process, allowing for a faster, private transfer of your business to your beneficiaries.

However, revocable trusts have some limitations. Because you retain control over the assets, a revocable trust does not provide any meaningful protection from creditors or lawsuits. Plus, assets in a revocable trust are still part of your taxable estate, so there are no estate tax advantages.

Irrevocable trusts

As the name suggests, an irrevocable trust is one that generally cannot be modified or revoked once it’s established. The grantor essentially relinquishes control of the assets to the trust. Key features include:

Asset protection: Since the assets are no longer under your ownership or control, an irrevocable trust can provide a barrier against creditors and litigation (assuming it’s properly structured and funded in advance of any claims).
Potential estate tax savings: Business interests placed in an irrevocable trust are generally removed from your taxable estate, which can be a powerful tool for reducing your estate tax liability.
Succession planning: Like a revocable trust, an irrevocable trust allows you to specify how your business should be managed and distributed to beneficiaries. The trustee is legally bound to follow these instructions.

The main drawbacks of irrevocable trusts are their inflexibility and loss of control. Once an irrevocable trust is set up and funded, you typically can’t modify the terms or take back control of the assets without beneficiary approval (and sometimes court approval). Additionally, placing a business in an irrevocable trust can result in the potential loss of a step-up basis at your death, which could result in higher capital gains taxes for your beneficiaries if, and when, they sell the business.

Transferring your business to an irrevocable trust also means giving up direct ownership and control, which can be a psychological hurdle for many entrepreneurs.

Key trust provisions business owners should consider

Regardless of whether you opt for a revocable or irrevocable trust, there are several key aspects your trust document should include if you’re a business owner:

Specific powers for managing the business

Your trust should explicitly authorize your trustee to continue operating the business, making investment decisions, hiring and firing employees, and taking other necessary actions to manage the company effectively. This helps ensure a smooth transition and continuity of operations.

Trustee succession plan

Name not only your initial successor trustee but also alternates in case your first choice is unable or unwilling to serve. Better yet, discuss the decision with your preferred trustee first to ensure they’re already willing and able to serve. You can also cConsider naming a professional fiduciary, such as a bank or trust company, if you’re not comfortable naming someone you know. Or you can name them as a backup to ensure there’s always someone qualified to manage the trust.

Beneficiary distribution instructions

Clearly outline how and when your business interests should be distributed to your beneficiaries. You might include provisions for the trustee to maintain ownership until certain milestones are reached, such as beneficiaries reaching a certain age or the business achieving specific goals.

Asset protection language

If creditor protection is a goal, your trust should include strong spendthrift provisions that restrict beneficiaries from pledging or encumbering their trust interests. This can help shield the business from beneficiaries’ personal liabilities.

Overriding the prudent investor rule

One often overlooked issue is the “prudent investor rule” that applies to trustees. This rule typically requires trustees to diversify investments and avoid concentrated positions. This could directly conflict with holding a controlling interest in a private business.

To address this, you may want to consider explicitly overriding the prudent investor rule in your trust document and grant the trustee power to maintain business interests. Without this provision, your trustee could actually be legally obligated to sell or diversify business holdings.

Dispute resolution procedures

Consider including mediation or arbitration clauses to resolve any disputes between trustees and beneficiaries outside of court, which can be costly and time-consuming.

One common challenge is balancing business operations with family financial needs, especially when family members aren’t involved in the business. One solution to this could be bifurcating trustee roles. Appoint one trustee (perhaps a business partner) to handle business operations and another (often a family member) to manage family financial matters.

Coordination with buy-sell agreement

If your business has multiple owners, ensure that your trust provisions align with any existing buy-sell agreements. Your trust should direct the trustee to carry out the terms of the buy-sell if triggered by your incapacity or death.

Considerations for specific business structures

The type of entity your business operates as can impact trust planning:

Corporations: If you own shares in a C-corporation or S-corporation, you’ll need to review the company’s bylaws and any shareholder agreements to ensure they permit trust ownership. S-corporation stock can only be held by certain types of trusts, so it’s a good idea to work with an attorney to structure your trust the right way.
Partnerships and LLCs: Review your partnership agreement or LLC operating agreement to see if it allows for trust ownership of shares. You may need to amend the agreement to accommodate your trust. Also, consider any restrictions on transfers of ownership and how they might impact your succession plan.
Sole proprietorships: While a sole proprietorship is not a separate legal entity, you can still use a trust to hold and transfer business assets like real estate, equipment, and intellectual property.

The advisor’s role in trust planning

If you’re considering trust ownership for your business, your financial advisor can be a valuable resource throughout the planning process. They can help you clarify your objectives for the business, both during your lifetime and after you’re gone. They can also guide you in prioritizing competing goals like maintaining control, minimizing taxes, and protecting assets.

With a deep understanding of your financial situation and estate planning needs, your advisor can help you weigh the pros and cons of different trust structures and determine whether a revocable or irrevocable trust (or a combination) is best suited for your circumstances.

Your advisor is often just one tool to have in your financial toolbox. They can serve as a point person to coordinate the work of your estate planning attorney, CPA, and other professionals involved in the planning process.

As your business and personal circumstances change over time, your advisor can help you review your trust plan to ensure it remains aligned with your goals.

Is a business trust right for you?

Placing your business interests in a trust can protect your company’s future, streamline your estate plan, and potentially minimize taxes. But it’s not a one-size-fits-all solution. The right approach depends on your specific goals, family situation, and business structure.

If you’re considering trust ownership for your business, start by meeting with your financial advisor. They can help you review your options and develop a plan that safeguards your legacy and ensures a smooth transition for your company when you’re no longer at the helm.

Reference Guide: 2025 IRS Inflation Adjusted Numbers for Estate Planning

The IRS just released its 2025 numbers adjusted for inflation. These can have a significant impact on wealth and estate planning.

For many people, the major take away is that the annual gift exemption is increasing to $19,000. For those that already have a gifting strategy or plan significant gifts in 2025—such as contributing to tuition or a down payment for a family member—this increase can help with certain tax strategies.

The other takeaway is the lifetime estate and gift tax exclusion is increasing to $13.99 million for individuals and $27.98 million for married couples, which applies to clients that have high-net worth estates. In 2025, this is even more significant because the Tax Cuts & Jobs Act (TCJA) is set to sunset at the end of the year. Unless Congress extends the provisions in the TCJA, the estate and gift tax exclusion will return to pre-2018 numbers—adjusted for inflation, it would likely be at just under $7 million for individuals.

That’s why it’s for critical for financial advisors to review these 2025 numbers alongside your clients’ plans to understand if there is any impact or opportunities for new estate tax strategies next year.

We reviewed Revenue Procedure 2024-40 and pulled out only the relevant numbers for wealth planning to provide advisors, and their clients, a simple reference chart. View it below or download a version that you can keep handy.

IRS Reference guide chart for 2025 inflation-adjusted tax numbers related to estate planning

Actionable takeaways & impacts

While the impact of these wealth transfer-relevant numbers on your clients’ estate plans will depend on their financial situation—for example, individuals with taxable estate well under $13.99 million are likely to be unaffected by the lifetime exemption—there are potential strategies you can employ for those that could be impacted.

Here are some examples of how you can use these numbers to create a strategy for affected clients in 2025:

1. Maximize lifetime wealth transfer

Your clients can now contribute significantly to irrevocable trusts and/or make substantial gifts without incurring taxes due to the increase in the lifetime estate and gift exemption to $13.99 million for individuals and $27.98 million for married couples.

This allows you and your clients to optimize their estate planning strategies, especially if they expect to be impacted by the TCJA sunset at the end of 2025.

2. Monitor taxable gifts

Next year, the annual gift tax exclusion is increasing to $19,000. This means your clients are able to give even more without triggering gift tax. Only anything above that amount will start to impact their lifetime exclusion.

If a client already has a gifting strategy in place, for example providing gifts to their grandchildren every year, make sure they know that they are now able to increase their non-taxable gifting amount.

You should also ensure that you’re helping them track their gifting amounts. If they exceed the $19,000 they will need to file a Form 709 to report taxable gifts.

3. Leverage 529 plan contributions

Due to the annual gift tax exclusion increase, clients can now contribute up to $95,000 to a 529 plan in a single year by utilizing the five-year election option.

This can be beneficial for your clients that are looking to superfund their children’s or grandchildren’s education funds without incurring fit taxes.

4. Evaluate trust tax implications

If your clients are considering irrevocable trusts, you should assess who will be the taxpayer for the trust (i.e. is it a Grantor Trust).

This evaluation helps your clients weigh potential estate tax savings against higher income taxes, providing a clearer financial picture for them.

5. Understand non-resident alien tax implications

Be mindful of the different estate and gift tax thresholds that apply to non-resident aliens. These can have a significant impact on planning strategies.

This chart will help you navigate those complexities more effectively.

6. Address expatriation and foreign gifts

For your clients that are considering moving to a foreign country, renouncing their citizenship or green card status and/or receiving large gifts from abroad, you should be aware of the reporting requirements and tax implications.

This chart will help you quickly find the new thresholds so you can ensure compliance for your clients and avoid any penalties.

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