Estate Planning in 2025: Protecting Multigenerational Wealth

Major Tax Changes in 2025
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Federal Estate Tax Updates:

  • Federal exemption increased to $13,990,000 per person ($27,980,000 for couples)
  • Estates exceeding $1 million above the threshold face 40% tax rate
  • New "One Big Beautiful Bill Act" creates additional planning considerations

State-Level Complications:

  • 13 states plus DC now levy estate taxes
  • Multi-state property ownership creates unexpected tax burdens
  • Example: Arizona resident with Minnesota vacation home may owe Minnesota estate tax

Key Challenges

The Liquidity Crisis: Most family wealth is tied up in illiquid assets (real estate, businesses, investments). When estate taxes come due, heirs may be forced to sell at unfavorable prices, dismantling family wealth.

Beyond First Generation: True wealth preservation requires thinking in generations, not just decades. Each generation faces tax burdens, market volatility, and spending pressures.

Strategic Solutions

1. Survivorship Life Insurance Benefits:
  • Lower premiums (covers two lives, pays after both pass)
  • Provides tax liquidity when most needed
  • More lenient underwriting process
2. Advanced Gifting Strategies
  • Annual Gifts: $19,000 per person ($38,000 for couples)
  • GRATs: Transfer appreciation while retaining income
  • Charitable Remainder Trusts: Income during lifetime, charity benefits, reduced estate taxes
  • Family Limited Partnerships: Controlled wealth transfer with management control
3. Insurance Trust Strategy

Place life insurance in an Irrevocable Life Insurance Trust (ILIT) to:

  • Remove death benefit from taxable estate
  • Provide liquidity for heirs
  • Ensure funds available when estate taxes are due
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Implementation Essentials

Regular Review: Tax laws change, family circumstances evolve - regular updates essential

Professional Coordination: Requires team approach with estate attorney, tax advisor, insurance specialist, and financial planner

Family Education: Next generation must understand money management, family values, and inherited wealth responsibilities
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Forward-Looking Strategies

Modular Planning: Design flexible strategies that adapt to changing tax laws

Jurisdiction Diversification: Spread assets across multiple states/countries to minimize single tax regime exposure

Generation-Skipping: Plan for grandchildren and great-grandchildren, maximize GST tax exemptions
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Key Takeaway

Estate planning in 2025 requires sophisticated, coordinated strategies that address federal and state tax changes while ensuring liquidity and family wealth preservation across generations. The complexity demands professional guidance and regular strategy updates.

We’d love to help you make the most of your estate planning. You can schedule a consultation with our team here.