How to Optimize Your Estate Plan with Adam Tarsitano, Ep #194

You may remember estate law attorney Adam Tarsitano from episode 165 when we went over the importance of a professionally prepared estate plan. Since the summer is a good time to revisit your estate planning documents, we thought it would be a great idea to invite him back to discuss how you can improve your estate plan. In the episode, we talk about how to enhance your today while planning for tomorrow so you can enjoy your ideal retirement.

Listen in to learn why you may not look forward to the federal tax exemption sunset in 2026, how to utilize the gift tax exemption, the difference in various trusts, and whether you should open a trust to avoid probate.

Why You May Not Look Forward to the Sunset in 2026

On January 1, 2026, the federal estate tax exemption is set to expire. At the current level, very few people have to worry about paying federal estate taxes. Individuals can pass on $12.92 million to their heirs without tax worries. This amount doubles for married couples due to portability.

However, in 2026, this amount is set to be cut in half while allowing for inflation adjustments. Though this sunset is still a few years away, and there’s a chance that new legislation could extend the exemption, you can start preparing for the change now.

How You Can Fully Utilize the Gift Tax Exemption

With this change in place, it means that approximately $7 million will be the limit for the estate tax exemption. Will this affect your financial plan? If your assets are close to this number, it’s best to plan now.

One way to lessen the tax burden for your heirs is to use the gift-giving exemption. Individuals can gift $17,000 to other individuals each year. This means that, if you are married, you and your spouse could potentially gift up to $68,000 in one calendar year to your child and their spouse.

If you would like to include your minor grandchildren in the gifting, you can set up a Crummey trust for them, which helps protect the funds from gift taxes. It allows you to gift up to $17,000, but maintain some control over the funds through a trustee until the minor becomes an adult. Currently, there’s no plan to sunset the gift tax exemption, however, the eligible amount can increase with inflation.

While you can decide to gift over the $17,000 amount per year, keep in mind that it will reduce your lifetime exemption amount. You will also need to file a gift tax return in the year that you made a larger gift.

The Charitable Remainder Trust vs the Charitable Lead Trust

If you want to prioritize charitable giving, there are two other options you might want to explore: a charitable remainder trust or a charitable lead trust. These two trusts work oppositely. With a charitable remainder trust, you can name a beneficiary who will receive money out of the trust during a set time period. When that period expires, the remaining assets will go to your charity of choice.

With a charitable lead trust, a charity will receive money from the trust during the set time period and your beneficiary will get the remaining assets once that period expires.

Do I Need a Trust to Avoid Probate?

Here in North Carolina, the standard trusts we would use to avoid probate are revocable trusts. These are fairly straightforward documents that are used frequently with the benefit of helping to avoid probate.

However, keep in mind that you have to set up the trust and make sure the assets you want to pass through it are titled in the name of the trust before you pass away or you won’t get the benefit from it.

Is it necessary?

Probate in North Carolina is not as costly or grueling as probate in other states, but working with an estate lawyer can help you decide the best course of action for you.

Estate planning needs are highly dependent on your situation.  Looking at these decisions in the context of your financial plan and goals as well as working with a team of professionals can give you the peace of mind that your wishes will be honored.

Outline of This Episode

  • [0:49] Federal estate tax exemption expiration
  • [3:03] Examples to consider
  • [11:31] The Crummey trust
  • [14:40] Another example of a higher net-worth couple
  • [17:21] Charitable remainder trust vs charitable lead trust
  • [18:44] Do I need a trust to avoid probate?
  • [21:43] Other things to consider

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