TAX STRATEGIES, ADVICE, & INSIGHTS

If your estate plan includes a revocable trust — also known as a “living” trust — it’s critical to ensure that the trust is properly funded. Revocable trusts offer significant benefits, including asset management (in the event you become incapacitated) and probate avoidance. But these benefits aren’t available if you don’t fund the trust.

Consider these facts on aging from the 2010 Census¹:

• The highest growth rate for a 10-year age group within the older population (age 65+) was for men 85 to 94 years old (46.5%). Women in this age group grew by 22%.
• Men 90 to 94 years old had the fastest growth rate (50.3%) of all five-year age groups.

Living this long may have unexpected tax consequences. Here's why.

The right estate planning strategy for you likely is the one that will produce the greatest tax savings for your family. Unfortunately, there can be tension between strategies that save estate tax and ones that save income tax. This is especially true now that the Tax Cuts and Jobs Act nearly doubled the gift and estate tax exemption — but only temporarily. Through 2025, income tax might be a greater concern, but, after that, estate taxes might be a bigger issue.

Fortunately, it’s possible to build an “on-off switch” into your estate plan.

No matter how much effort you’ve invested in designing your estate plan, your will, trusts and other official documents may not be enough. Consider creating a road map — an informal letter or other document that guides your family in understanding and executing your plan and ensuring that your wishes are carried out.

A revocable trust — often referred to as a “living trust” — can help ensure smooth management of your assets during life and avoid probate at death. And you may know that the trust isn’t effective unless you “fund” it — that is, transfer ownership of your assets to the trust.

But what about assets such as automobiles and other vehicles? Should you transfer them to your revocable trust?

Donating to charity is a key estate planning strategy for many people. It reduces the size of your taxable estate and it can help you leave a lasting legacy with organizations you care about.

The benefit of making such gifts during life rather than at death is that you may be eligible for an income tax deduction. Qualifying for a charitable deduction is, in some respects, a matter of form over substance. The IRS could disallow a deduction, even if it’s otherwise legitimate, if you fail to follow the substantiation requirements to the letter.

Have you made substantial gifts of wealth to family members? Or are you the executor of the estate of a loved one who died recently? If so, you need to know whether you must file a gift or estate tax return.

If your son or daughter currently is home from college on winter break, now is a good time to sit down and discuss a few estate planning documents he or she should have at this stage of life. Let’s take a closer look at four such documents:

Portability allows a surviving spouse to apply a deceased spouse’s unused estate tax exemption amount toward his or her own transfers during life or at death.

If you or one of your adult children is getting married, you may be concerned about protecting your family’s assets in the event of a divorce.