Estate Planning: Gifting Strategies to Consider

With the expected gift tax changes looming on the horizon, many clients are looking at ways to restructure estate plans to avoid estate and gift taxes. In this post, we’ll look at a few estate planning gifting strategies to consider: Family Trusts, Gifting Plans, Life Insurance Trusts, Grantor Retained Annuity Trusts (GRATS), and Spousal Limited Access Trusts (SLATs).

Family Trust
This type of trust benefits any family members of the grantor, including children, grandchildren, siblings, spouse, etc. and are commonly used to ensure that specific beneficiaries receive the intended assets when the grantor dies. Family trusts typically avoid probate court and dispense assets faster. They can also be set up as revocable or irrevocable.

Gifting Plans
Gift planning refers to a major donation of an asset to a nonprofit or other organization, and can be performed before or after a person’s death. Gift plans can be based on cash or other financial assets like stocks or securities, but can also include artwork, personal property, real estate, etc.

Life Insurance Trust
Life Insurance Trusts transfer the ownership of a term or whole life insurance policy into a trust so that when the insured person dies, the death benefit is paid to the trust and the trustee then distributes the funds according to the trust’s terms. Like many other trusts, life insurance trusts can be set up as revocable or irrevocable. If structured correctly the life insurance proceeds are not part of the Decedent’s taxable estate.

Grantor Retained Annuity Trust (GRAT)
A GRAT, or Grantor Retained Annuity Trust, is a way to minimize taxes on large financial gifts through an irrevocable trust. After placing assets into the trust, the grantor receives an annuity each year until the trust expires. After the last annuity is paid, the beneficiary receives the assets. One caveat is that if the grantor dies before the trust expires, the assets become part of the taxable estate.

Spousal Limited Access Trust (SLAT)
Another irrevocable trust, the Spousal Limited Access Trust (SLAT) allows a spouse to place an asset into a trust to benefit the other spouse while removing assets from the combined estate. This type of trust allows individuals to take advantage of the current federal exclusions before they sunset Dec. 31, 2025. The beneficiary spouse can request distributions from the trustee during their lifetime, usually to maintain a standard of living. This type of trust requires careful planning and budgeting, as distributions to the non-donor spouse are reintroduced into their taxable estate.

The Estate Planning team at Hackstaff, Snow, Atkinson & Griess LLC routinely assists individuals, business owners, professionals and seniors on estate tax law issues. We can help you navigate the complex estate planning tools to find the options that suit your individual needs best.