Bill Andrakakos, CFA, FRM
President & Chief Investment Officer

Trusts are crucial instruments in estate planning. They provide control over the distribution of your assets, potentially lower estate taxes, and they can protect your estate from the probate process. By placing assets in a trust, you can reduce the taxable value of your estate.  For example: 

  • Irrevocable Trusts can remove assets from your estate entirely, thus reducing the total estate value subjected to taxes.  
  • Charitable Trusts can reduce estate taxes by directing a portion of the estate to charitable organizations.  
  • Qualified Personal Residence Trusts (QPRT) maintain ownership of your residence allowing you to retain the right to live in the home for a specified period while removing its value from your estate.
  • Grantor Retained Annuity Trusts (GRAT) can hold appreciating assets and provide an annuity payment stream for a specified term, with any remaining assets passing to beneficiaries free of gift or estate tax.

The act of gifting is not just a means of sharing wealth but also a method of reducing taxable estate value. The IRS permits individuals to give a specific sum annually without being subject to gift tax. Regular, planned gifting can strategically lower estate value and thereby the potential estate tax liability. Take advantage of annual gift tax exclusions to transfer assets tax-free each year to beneficiaries. 

Charitable donations can also play a role in diminishing the size of a taxable estate. Contributing to charitable organizations, foundations, or trusts not only supports a cause close to heart – but also scales back estate taxes.  

Life insurance payouts typically do not attract income tax. However, they can add to the estate value and incur estate taxes. By assigning the policy to a trust, the benefits can be kept off your estate’s taxable value.  By establishing an Irrevocable Life Insurance Trust (ILIT) to hold life insurance policies outside of your taxable estate, they can provide tax-free proceeds to beneficiaries.

Utilize retirement accounts and other qualified plans strategically. These assets may have tax advantages and can be structured to minimize estate tax exposure. 

Educational investments like 529 plans offer another way to reduce an estate’s size while contributing to the future of a child’s education. Contributions grow tax-free if they are used for qualified educational expenses.  

FLPs can be structured to enable the previous generation to retain control over assets while sharing the financial benefits with other family members. Unlike irrevocable trusts, the members of a family limited partnership can change the terms of the agreement. Additionally, FLPs can offer some decreased liability. Family members who have limited partnership interests can be protected from creditors.

Early and regular reevaluation of your estate plan is key to seizing the benefits of a shifting financial landscape and changes in tax laws. Minimizing estate taxes and preserving wealth for beneficiaries requires a thoughtful approach and proactive planning. By working together with financial advisors, estate planning attorneys, and tax professionals you can develop a comprehensive strategy tailored to your specific goals and financial situation. Reach out to find out how Aaron Wealth Advisors can help create a legacy for generations to come. 

*Aaron Wealth Advisors LLC is registered as an investment adviser with the Securities and Exchange Commission (SEC). Aaron Wealth Advisors LLC only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

*This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances or any particular investor or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. The information contained in this presentation represents factual information, analysis, and/or opinions regarding various investments. Any opinions expressed in this material reflect Aaron Wealth’s views as of the date(s) indicated in the Presentation and are subject to change.

*Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by the adviser), or product made reference to directly or indirectly, will be profitable or equal to past performance levels.

*This document contains forward-looking statements, including observations about markets and industry and regulatory trends as of the original date of this document. Forward-looking statements may be identified by, among other things, the use of words such as ”expects,” “anticipates,” “believes,” or “estimates,” or the negatives of these terms, and similar express results could differ materially from those in the forward-looking statements as a result of factors beyond our control. Recipients of the information herein are cautioned not to place undue reliance on such statements. No party has an obligation to update any of the forward-looking or other statements in this document.

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