What Your Clients Should Know About Estate and Gift Planning

What Your Clients Should Know About Estate and Gift Planning | Elevate CPA Group

For many people, estate and gift planning is an unpleasant topic and complicated process. Ignoring it, however, can lead to missed opportunities for significant tax savings. You, as an RIA, can make sure your clients are paying attention to this important task. Doing so can not only allow you to provide more value to your clients but also can help you attract new ones by engaging your clients’ families.

Here are some estate and gift planning basics you—and your clients—should know.

Estate and gift tax exclusion amounts

The lifetime exclusion is currently at $12.06 million. This applies to lifetime gifts that don’t qualify for the annual tax exclusion, which is currently at $16,000, and bequests at death. The current estate and gift tax rate is 40%; however, Biden’s tax proposal is looking to increase this to 45% and greatly reduce the lifetime exclusion to $3.5 million.

Regardless of what happens with the tax proposal, it’s important to note the $12.06 million amount is temporary (adjusted annually) and applies only to tax years up to 2025. On January 1, 2026, it will revert to approximately $7 million, unless Congress decides to make the higher exclusion permanent.

Annual gifting best practices

Under current tax law, an individual may give up to $16,000 per year to any one person. For example, say Mr. and Mrs. X have two married children and five grandchildren. Mr. and Mrs. X could give up to $32,000 to each of their two kids, $32,000 to the spouse of each kid, and $32,000 to each grandkid for a grand total of $288,000.

It is important to remember that gifts into a trust for the benefit of the donee are generally not eligible for the annual gift tax exclusion. When a client embarks on a gifting strategy, it’s important that no assumptions are made. Careful planning is critical to avoid unintended consequences such as generation-skipping tax, underutilization of annual gifting, or inadequate disclosure on gift tax returns.

Opportunities that are NOT considered gifts

Your clients should know that certain “gifts” are not considered as such in the eyes of the IRS. These include payments made directly to a school for tuition, including K–12 as well as higher education. Medical expenses paid directly to a medical provider also do not count as gifts. Both types of payments are a great way to increase annual gifting and truly provide a valuable benefit for the donee.

How you can add value

You have an opportunity to help your clients plan—immediately. Given the current estate and gift tax rules and potential changes to them, urge your clients to engage an estate planning attorney sooner rather than later. In 2025, these attorneys will be very busy!

<p”>As an RIA, you can help clients determine what asset values are available for gifting and which are best to receive as a beneficiary. You can also serve as your client’s advocate, to make sure their attorney is hearing and executing their wishes.

As I mentioned, discussing estate and gift planning with your clients gives you a way to engage their younger generations. This could not only increase the value you provide but also the value of your practice.

Bring an expert to the table

As your in-house tax expert, we can support you in discussing estate and gift planning with your clients. In addition to helping, you identify opportunities and vetting your suggestions to clients, we can come in to directly advise you and your clients where needed. If you’d like to discuss how we can help you add value, contact us today.