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Walking Into the Sunset: Thoughtful Planning Now for Your Clients

Sep 10, 2024 | Professional Advisors

Walking Into the Sunset: Thoughtful Planning Now for Your Clients

Without legislation to prevent it, the sunsetting of current estate tax laws at the end of 2025 will dramatically reduce the federal estate tax exemption from $13.61 million per person in 2024 to approximately $7 million in 2026 (including adjustments for inflation). This change would affect many high net-worth individuals and families, likely exposing many more estates to federal estate taxes.

Indeed, for a client who is charitably inclined, making larger lifetime gifts to charity and arranging for charitable bequests will help reduce the client’s taxable estate because of the charitable estate and gift tax deduction. 

Oklahoma City skyline with setting sun

Donor-advised, field-of-interest, designated, unrestricted and endowment funds at OCCF are flexible and effective charitable recipients of both lifetime and estate gifts. For some clients, you may wish to begin exploring a comprehensive, multi-generational wealth transfer plan, potentially using key tax-planning vehicles:

How OCCF Can Help

Donor-advised, field-of-interest, designated, unrestricted and endowment funds at OCCF are flexible and effective charitable recipients of both lifetime and estate gifts.

  • Charitable Lead Trust (CLTs) may be particularly effective in the current environment. These trusts can provide income to your client’s fund at OCCF for a set period, with the remaining assets passing to family members. Right now, the higher exemption allows for potentially significant initial funding of such trusts because the value of the remainder interest counts toward the client’s estate and gift tax exemption.
  • A Generation-Skipping Trust is an irrevocable trust that can benefit a client’s grandchildren and later generations. This trust utilizes a client’s Generation-Skipping Transfer (GST) tax exemption, which parallels the estate and gift tax exemption. This type of trust could allow a client to take advantage of the higher exemption before it potentially decreases in 2026. In some states, it is possible for these trusts to go on for many generations in a “dynasty” format, such that each generation benefits from the trust’s income (and potentially principal for health and education) without the trust’s assets being included in the beneficiaries’ estates for estate tax purposes.
  • Multi-Generational Funds at OCCF In addition to charitable lead trusts or generation-skipping trusts, your clients can establish Donor-Advised Funds (DAFs) at the Community Foundation that can function much like a family foundation. With a DAF, successive generations can serve as advisors or the Community Foundation can step in after the first or second generation to recommend grants from the fund to carry on a tradition of supporting the causes most important to your clients.

The team at the Community Foundation looks forward to working with you to achieve your clients’ long-term charitable goals.

The team at the Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a secondary source as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.

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