Estate Planning Essentials

Imagine this: You’ve worked hard your entire life, building wealth and providing for your family. But without a solid estate plan, your legacy could face unnecessary taxes or disputes. For Americans nearing retirement, protecting wealth and ensuring its smooth transfer to loved ones is a crucial part of financial planning.

Wills and trusts are two foundational tools in estate planning that can help you protect your assets, minimize tax burdens, and help ensure that your wishes are honored. Here’s what you need to know.

Disclaimer: The information provided in this blog is for educational purposes only and does not constitute legal, financial, or tax advice.

What Is Estate Planning?

Estate planning involves preparing for the management and distribution of your assets during your life and after your death. It helps ensure your wealth is transferred according to your wishes, supports your loved ones, and mitigates legal or tax complications.

Estate planning can benefit retirees or individuals nearing retirement with significant wealth. Without a plan, the distribution of your assets may become subject to lengthy legal proceedings, high estate taxes, or unintended recipients.

Understanding Wills and Trusts: A Comprehensive Overview

Wills and trusts are essential tools in estate planning, each serving unique purposes to help you manage and distribute your assets effectively. Here’s how they compare and complement each other:

Wills

A will is a legal document that outlines how your assets should be distributed after your death. It also allows you to appoint guardians for minor children and specify your final arrangements. Key features include:

Simplicity: Wills are straightforward to create and modify as your circumstances change.
Probate Process: Wills must go through probate, a court-supervised process that validates the document and ensures assets are distributed as outlined. This process can be time-consuming and costly.

Trusts

A trust is a legal arrangement where a trustee manages assets on behalf of beneficiaries. Trusts can help avoid probate, ensure privacy, and reduce tax burdens. Types of trusts include:

Revocable Living Trusts: Flexible during your lifetime, avoids probate, and offers privacy.
Irrevocable Trusts: Protects assets from creditors and helps reduce estate taxes.
Specialized Trusts: Options like Charitable Trusts, Spendthrift Trusts, and Generation-Skipping Trusts address specific needs.

Feature	Will	Trust
Probate	Required	Avoided
Privacy	Public Record	Private
Complexity	Simple	Requires More Setup
Cost	Lower Initial Cost	Higher Initial Cost
Tax Benefits	No	Yes (for certain types)

For many individuals, the most effective estate plan involves a combination of both wills and trusts. For example, a pour-over will can work alongside a revocable living trust to ensure any assets not transferred to the trust during your lifetime are directed to it upon your death.

By combining the explanations of wills and trusts, this section avoids redundancy and provides a clear, cohesive comparison for readers.

Key Changes to Estate Tax Laws and Advanced Planning Strategies

The Tax Cuts and Jobs Act of 2017 introduced significant modifications to the federal tax code, doubling the federal estate, gift, and generation-skipping transfer (GST) tax exemptions. The exemption increased from $5.49 million in 2017 to $11.18 million in 2018, and due to inflation adjustments, it has risen to $13.61 million in 2024. However, unless Congress intervenes, these exemptions are set to revert to approximately $7 million (adjusted for inflation) on January 1, 2026.

Advanced Estate Planning Strategies

For high-net-worth individuals, advanced estate planning strategies can help preserve wealth, reduce tax burdens, and maximize the legacy passed on to loved ones. Below are some key strategies to consider before the scheduled exemption decrease in 2026:

1. Lifetime Gifting

Lifetime gifting allows you to transfer wealth to your heirs while reducing your taxable estate.

Annual Gift Tax Exclusion: Each year, you can gift up to $18,000 per recipient in 2024 ($19,000 in 2025) without affecting your lifetime gift tax exemption. These gifts are a simple and effective way to reduce your estate’s taxable value.
Lifetime Exemption Gifting: Use the current federal gift tax exemption ($13.61 million in 2024) to transfer significant assets during your lifetime. The exemption follows a “use it or lose it” rule, meaning unused portions will not carry over if the exemption decreases in 2026.

Year of gift	Annual exclusion per donee
2011 through 2012	$13,000
2013 through 2017	$14,000
2018 through 2021	$15,000
2022	$16,000
2023	$17,000
2024	$18,000
2025	$19,000

2. Irrevocable Life Insurance Trusts (ILITs)

An ILIT removes life insurance proceeds from your taxable estate, helping shield these funds from estate taxes.

The trust owns the life insurance policy, and you make annual contributions to the trust to cover premium payments.
Typically, these contributions qualify for the annual gift tax exclusion, minimizing tax consequences.
At your passing, the death benefit is distributed to beneficiaries free of estate and GST taxes.

3. Dynasty Trusts

A Dynasty Trust helps protect wealth for multiple generations while reducing estate and GST taxes.

Assets transferred to the trust are removed from your taxable estate.
Any appreciation or income generated by the trust assets is also shielded from future estate taxes.
This trust can last for several generations, depending on state laws, making it ideal for long-term wealth preservation.

4. Spousal Lifetime Access Trusts (SLATs)

A SLAT allows one spouse (the grantor) to transfer assets to an irrevocable trust for the benefit of the other spouse.

The trust removes assets from the grantor’s taxable estate, reducing potential estate tax liability.
While the grantor cannot access the assets, they can benefit indirectly through distributions made to the beneficiary spouse.
This strategy provides financial security while preserving wealth for future generations.

Why Act Now?

Implementing these strategies before the 2026 exemption decrease can help you maximize current tax advantages and reduce your estate’s tax burden. With proper planning, you can ensure more of your wealth is preserved for your heirs rather than lost to taxes.

These strategies work best when tailored to your specific financial goals. Consulting with a professional is essential to create a plan that aligns with your needs and ensures compliance with current laws.

Common Misconceptions About Wills and Trusts

“A will covers everything.”
Not all assets pass through a will. Jointly owned properties, retirement accounts, and life insurance policies often transfer directly to named beneficiaries.
“Estate planning is a one-time task.”
Estate plans should be reviewed periodically or after major events like marriage, divorce, or childbirth.

The Importance of Professional Guidance

Estate planning is a complex process, especially for high-net-worth individuals. Working with experienced professionals helps ensure your plan aligns with your goals, maximizes tax efficiency, and complies with current laws.

How CKS Summit Group Can Help

At CKS Summit Group, we’re experienced in helping clients nearing retirement navigate the financial complexities of preserving and transferring wealth. Our team can provide you with the educational tools you need to help integrate your estate plan with your overall retirement strategy.

By prioritizing your financial independence and legacy, we work to empower you to enjoy retirement while helping safeguard your wealth for future generations.

Final Thoughts

Smart planning takes time and requires experienced professionals. Wills and trusts are powerful tools that enable you to control your wealth and provide for your loved ones. Whether you’re just beginning to consider estate planning or looking to refine an existing plan, understanding these essentials is the first step.

If you have questions or would like to discuss next steps before the Exemption sunsets, reach out to CKS Summit Group.